Travel Markets Insider’s Lois Pasternak had the opportunity to speak with René Riedi, chief executive officer of Dufry’s Latin America division and Cyrille Beauviche, Dufry’s Divisional Commercial Director, Latin America & Caribbean, during the inauguration of Dufry’s Lima Duty Free store in August.
The two executives discussed some of the challenges faced by Lima Airport Partners (LAP) and Dufry and the thoughts behind creating such a state-of-the-art facility to best meet the needs of such a burgeoning market, as well as the benefits that are now accruing from combining the best practices from the various companies it has acquired.
TMI: What is the goal of the new Lima Duty Free store and how well do you think the design of the store has accomplished Dufry’s objectives?
René Riedi: We had two goals. Firstly to bring in local products, group them in one dedicated retail space and integrate them into an international brand environment, and secondly, to accommodate destination and transit passengers.
With respect to the first goal, LAP clearly saw that other airports are improving and they knew that if they didn’t improve, they would lose out on the commercial side. These plans started even before the acquisition (World Duty Free) with Pedro Castro, who was in negotiations for the new contract. The new store was a topic of the negotiations.
After Dufry acquired World Duty Free, we continued the negotiations. The goal was to develop a store which meets the international standards of today. Airports in other parts of South America were investing, changing the environment and improving the infrastructure. So LAP wanted to have a commercial environment more in line with those standards.
We had to overcome some regulatory issues in order to accomplish this. One example is that both LAP and Dufry wanted a walk-through store. But the local regulatory authority requires a ten-meter wide corridor in the airport. You cannot design a walk-through store with a ten-meter corridor in the middle. It is not possible. You lose the aspect of the walk-through concept. To meet the requirement, we came up with the idea of changing the location of the corridor. So, there is a huge corridor on the right hand side right past security, which respects this 10-meter requirement. But most passengers do not even notice it unless they go through the immigration filter at the very far right.
We were able to convince the regulatory authority – with the help of LAP – to create the corridor on the side of the store instead of in the center of the store. If the corridor was in the center, it would have been the same as it was before. Eventually they agreed which is fantastic- we have the walk-through store!
The second challenge we faced was to accommodate both destination and transit passengers, who had to exit into the gate area through the center of the store. We had transit passengers coming in on one side, and the other passengers coming through immigration on the complete opposite side of the store. The difficulty was to create an environment that maximized the revenue and presented the products to both sets of passengers. Since only one section had transit passengers, and another area only had destination passengers, we needed to try to create an environment that would cross over both passenger groups. That was a real design challenge. Our solution was to ensure that the section of the store entered by the transit passengers carried a similar selection of some key products that are also featured elsewhere in the store, especially tobacco and spirits.
I think that we managed it quite well. We may need to make some additional fine-tuning when we see how it settles in, but as it looks today, I think we have made a good start.
This is a store – in my opinion – that not only looks impressive, and delivers a very positive in store environment for customers, but it is also efficient. And efficiency translates into revenues.
TMI: The store sparkles. The colors are brilliant. What part does lighting play in that?
RR: Many factors play a role in this. The personalization plays an important part. And in today’s retail environments, the way we arrange the lighting is key. With direct light you can illuminate ‘hot spots’, you can create atmosphere, you can do so many things with light.
Lighting is a very cost effective way of creating atmosphere and special effects. And impact. We have seen in the last couple of years how lighting plays such an important role in shop development. Digitalization is another aspect. We are going to bring in video walls in the circular area where the promotions are located and also at the entrance of the store.
Suppliers will be embedded in the whole process of developing the design. This is only the beginning and I think that Cyrille can give you more ideas about the next stage and the evolution of our store design.
In the future, our suppliers will be much more involved in the design of the stores and will play an important part and obviously make valuable contributions to the process.
Cyrille Beauviche: We will bring even more emotion into the store through the various applications of the technology tools that we will use.
Firstly, digital technology offers the means to transform a message to fit different passenger profiles, depending on flights. For two hours we can rebrand a store to feature the products that a specific customer profile prefers. This is how we adapt to our customer profile by nationality in real time ie. highlighting Chinese cigarettes during the two-hour timeframe before a flight with Chinese passengers. Technology also helps us communicate offers. We can talk about Dufry or we can give the space to the brands.
In Peru, the goal now is to keep upgrading our store. I see the video wall adding real impact and making the promotion area a real focal point for customers.
We have a lot of promotional space in this store that brand partners can use to really showcase their products.
RR: I think that what we have accomplished here in Peru with the design and development is a store that is raising the bar in the travel retail market in Latin America. Clearly, Peru is becoming a benchmark for the market here and I think we have succeeded in not just designing a great store, but a store that is appealing, efficient and works very well for all the stakeholders; Dufry, LAP, and all our other partners.
To a large extent, we are now seeing the pay-off from the acquisitions. We have been able to take all the best practices from the different companies, and apply the know-how and expertise that each team holds to the design of our stores, and we can see this is really coming together now.
CB: One of the main benefits for our passengers is that with the acquisition of Nuance and World Duty Free we are now one single company and we are able to take advantage of the best of whatever each company has to offer. Each of the companies has a strength, and we are combining these strengths together into one company.
RR: We are going to see more of this advantage in the future, and airports will see the advantage, and the passenger will see the advantage, and the supplier will take advantage of it, with enhanced customer service and in many other ways. Any stakeholders involved with us are going to notice the positive effect of these acquisitions.
Nuance and World Duty Free had very high standards of design. They designed very good stores. We (Dufry) had designed very nice, efficient stores, but now the combination gives us a more appealing and efficient design.
You will see even more improvements going forward. It all results from retaining the know-how and building best practices.
In the month that the store has been open Dufry has seen an increase of sales “by a good margin.” We can clearly see a significant increase in sales. This is partly due to the increased size of the store—we have nearly doubled the space – operating about 3000 sqm today between the departure, last minute and arrivals stores – departures has significantly increased sales, last minute is about the same.
This implies two things. We had to bring in new brands, as we said in the presentation. We brought in 15 new brands. And seven of these are new to the market (Peru). Even the Peruvian who travels to the airport will see new brands he hasn’t seen at the airport before, and seven of them are not available in the local market.
We have also increased the breadth of the product mix. We have a lot of store to fill, especially with perfumes. We have a huge selection. We have travel sets, duos, we have very local brands that you may not have ever heard of.
CB: And we have these huge promotional areas which are key to our strategy. On top of offering the best products, we offer the best prices and the best deals to our customers.
RR: To do this you need the right space, the right environment, you need promotional platforms.
CB: And it is what you do with these areas, how you create “in store theatre” to be make them more impactful for the customer. It is all about this. Our team has identified a lot of improvements in terms of the promotional mix, the mechanics of it and what we should promote.
Our “promotions” include both price-off, multi-purchase special deals, but also HPPs and SPPs, tasting bars and product launches. The Coty Flower Garden is an example. We give space to the brand for a good return, not only for us but for the brands also. We have to make every aspect efficient and qualitative for the brands. Both to present the brand image and to invest in our store. This is another challenge.