Luxury retail in the era of mass tourism
Speaker: Nicolas Savary General Manager JAL-DFS (DFS Group)
When: November 21, 7pm
Where: 5F Nihonbashihoncho Square,1 Chome-2-6 Nihonbashihoncho, Chuo-ku,Tokyo-to, 103-0023 JapanTel: 03-4578-3400
How much: 3,000 (light food, wine, soft drinks)
Map link: https://goo.gl/maps/NmCG1yps2ZQ2
DFS plays in the international duty free sector, selling “luxury goods to the traveling public” in airports and downtown in duty-free stores. In Japan, they have a JV with JAL, headed by our speaker, Nicolas Savary.
Duty free business is based on two concepts. Firstly, a country’s exporters are exempt from the sales tax imposed by their government on companies selling domestically. This rationale is to allow companies to be more price-competitive overseas and thus expand exports. Second, customs officers overseas don’t bother taxing imports if they are for personal use, since the amounts are too small. The result is (theoretically at least) cheaper products for shoppers.
It’s a lucrative sector: DFS’ co-founder Robert Miller is worth 2.8 billion dollars according to Forbes in 2017. Prospects for increased growth are bright, with 1.2 billion people making overnight trips outside their home country in 2016, according to the World Tourism Organization, and that figure grows in the low single digits most years.
However, it is not quite a “license to print money”. Nicolas has to deal with the rise of the ruthless trader-tourist, especially Chinese. Like an FX trader, the whole globe is his/her market place. He keeps the same eagle eye on exchange rates and lacks loyalty to any particular store or staffer. He looks only at his/ her “bottom line”.
Geopolitics can make a huge difference. When South Korea or Japan oppose its policies, China’s response can be brutal: Chinese tourist numbers will instantaneously drop drastically, forcing retailers in those countries to forego large amounts of revenue. A spat about installing a US anti-missile system, for example, led to what the Korean government estimates could be a 27% drop in tourist arrivals for 2017.
At the micro level, the physical environment of an airport is very different from the high street. Time and space constraints make it difficult for the retailer to add high-touch, personalized services. Nicolas will explain how to overcome these challenges so that the only upside is not the price.
One controversial topic is if travelers really do get lower prices in the Duty Free stores. Some store operators may make deals with airports to keep out their rivals. Nicolas will also explain how these strategies are set.
Come to this event to hear Nicolas outline the management challenges he faces and discuss an increasingly important retail market.