By Jaewon Kang and Sharon Terlep
Makers of luxury goods from liquor to perfume think they have
found the antidote to the fading American shopping mall: airport
terminals.
The world's airports, drawing ever more travelers with time to
kill, have become havens of high-end shopping, where stores sell
$400 bottles of whiskey and $4,000 purses against the backdrop of
day spas, hot springs and, in one case, a butterfly garden.
For the first time last year, Estée Lauder Co. generated more
revenue at airports globally than at U.S. department stores, which
for decades had been beauty companies' biggest sales driver. Other
luxury-goods companies, from spirits maker Bacardi Ltd. to Kering
SA's Gucci, are also expanding their presence at airport
terminals.
"Very few channels have almost guaranteed traffic," said Olivier
Bottrie, who heads Estée Lauder's global travel-retail business.
"When a department store goes away, it's not a major catastrophe.
But if a major airport went away, it would be a major
catastrophe."
An average person travels by plane three to four times a year,
and spends about 72 minutes waiting between security and flight --
the so-called golden hour -- according to Bacardi. Travelers,
especially those coming from Asia, increasingly work high-end
shopping sprees into their trips, planning layovers around access
to lavish shopping, executives say.
Global sales of duty-free and other travel-retail channels rose
about 9.3% to reach a record $76 billion in 2018, up from $69
billion in 2017, according to research firm the Data Circle. Travel
retail consists of airport shops, in-flight purchases, duty-free
stores neighboring airports, cruises and online orders picked up at
the airport. All stores located beyond airport customs are
duty-free.
Especially attractive is the influx of travelers with disposable
income from emerging markets such as China, India, Russia and
Brazil, where the fast-expanding middle class means untapped
potential. In China, for instance, only 9% of people have a
passport; every day an estimated 7,000 Chinese travelers take their
first international flight, said Vinay Golikeri, managing director
of global travel-retail at Bacardi.
Estée Lauder is among the biggest beneficiaries of a growing
appetite for high-end shopping at the world's airports. Travel
retail comprised about 18% of the beauty giant's $13.7 billion in
sales last year, surpassing sales from Macy's, Saks Fifth Avenue
and other department stores in North America. A decade ago, travel
retail was 7% of retail sales, while North American department
stores were 30% of total sales.
At L'Oréal SA, which houses the Lancôme and Maybelline brands,
travel-retail sales rose 27% last year to exceed EUR2 billion
($2.26 billion) in sales.
For luxury brands, airport shops offer direct access to shoppers
who are less familiar with high-end names but are eager to purchase
products they can't find near home.
"It's not about discounting now, it's really about experience,"
said Edgar Huber, president of travel retail for Coty Inc. The
company's drugstore brands such as CoverGirl and Clairol have been
struggling for years with declining sales, while its luxury unit
continues to grow, fueled in part by travel retail. Last month, the
company rolled out a line of Gucci lipsticks at airports including
a $38 tube called Goldie Red that sells online for $38.
Mr. Huber said roughly 15% of travelers buy at travel-retail
outlets, leaving room for growth. And, he said, airport shoppers
are attractive because they tend to have time to burn and therefore
linger longer in stores.
Mieko Tsukimori, 68, and her husband arrived at Haneda
International Airport in Tokyo last month three hours before their
flight to Hong Kong, which allowed them to browse through stores
for Japanese souvenirs. Lined with red-lacquer columns, Haneda
offers a theme-park version of Edo-era Tokyo, complete with a
replica of the famous all-wood Nihonbashi bridge.
"We come here early and have some tea and anmitsu," Mrs.
Tsukimori said, referring to a Japanese confectionery with
sweet-bean paste.
Luxury brands are also hoping to attract travelers with more
adventurous tastes and time to try unusual items.
"Over half of the people when they travel and browse stores,
they're looking for something they can't find back home," said
Vinay Golikeri, managing director of global travel-retail at
Bacardi, which also sells Grey Goose vodka and Patron tequila.
In May, Bacardi rolled out a three-part series for its Aultmore
Scotch whisky at Heathrow Airport in the U.K., selling each bottle
for $400. The company found that most shoppers were buying all
three bottles totaling $1,200.
Mayumi Negishi contributed to this article.
Write to Jaewon Kang at jaewon.kang@wsj.com and Sharon Terlep at
sharon.terlep@wsj.com
(END) Dow Jones Newswires
June 17, 2019 08:14 ET (12:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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