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Catering to the new phenomenon of price-conscious air travellers, who use low cost airlines and the internet, is a key challenge facing duty free retailers, according to a new report by Euromonitor International, "The Global Duty Free Market: Opportunities and Restraints to 2010".
The trend towards low cost airlines has resulted in consumers travelling more and the airline industry rebounding. This has had a positive influence on the performance of the duty-free market, which according to Euromonitor International’s new research grew by 3% between 2004 and 2005. Despite this growth, the challenge for duty free retailers is to understand how their consumer base is evolving and how to effectively tap into this market.
The low cost consumer With the low cost traveller taking airports by storm, retailers are adjusting their strategies to cater to this new consumer group. Duty free shoppers can no longer be characterised as business travellers or families with above average wealth. Rather, they are coming from all social backgrounds and increasingly from a wider range of geographical destinations. One strategy for retailers is to attract travellers who are not necessarily committed duty-free shoppers, but can be attracted by convenience or impulse products. Confectionery, for example, has gained a growing profile in duty free outlets, showing growth of 8% between 2000 and 2005. Confectionery is ideal for attracting low cost travellers into stores as it not only serves gift giving needs but it can also be used for immediate consumption.
Once consumers are in the store, however, the goal is to keep their interest and encourage them to spend more money. As a result, retailers are improving the aesthetic appeal of their stores by designing interiors to attract and hold consumers’ interest. Further, they are broadening their price and product ranges to appeal to a wider variety of consumers. Daily-use cosmetics, as opposed to gift items such as fragrances for example, can appeal to this type of consumer, as they have a practical use and a potentially lower price point.
Duty free operators and brand owners are also starting to work more closely by making duty free outlets the platform for new product trials. This means that while brand owners can trial their new products in an environment free from competitive discounting and promotions, duty free outlets get a continually refreshed product line that helps to attract even the most jaded consumer.
Outlook Although the fortunes of the duty free industry have typically been closely linked to the performance of the tourism industry, Euromonitor International predicts that this is less likely to be the case in the future. Rather, the duty free industry must create its own growth by refining its retailing strategy and getting to know its customers better. According to Euromonitor International, the duty free industry is expected to grow by 20% over the next five years. With the highest passenger growth coming from Asia and the social status of the traditional traveller changing, the key to future success for duty free retailers is to better understand their consumers, where they are coming from and how to effectively cater to their needs.
Click here to view the Strategy Briefings reports The Global Duty Free Market: Opportunities and Restraints to 2010 is part of Euromonitor International’s new IMIS Strategy Briefings series.? It assesses the size and structure of the duty free business and analyses the key regulatory, consumer and sectoral trends that will underpin its future expansion.
About Euromonitor
Euromonitor International is the world’s leading provider of global consumer market intelligence and has been publishing research on international markets for over 32 years.
With more than 600 analysts and consultants world-wide, Euromonitor International has an unrivalled research network specialising in global consumer markets and service industries. The Company's in-house Consultancy division also undertakes bespoke research projects on all sectors, including industrial, business to business and high-tech industries.
Euromonitor International produces hundreds of new reports each year, which are published in a variety of formats to suit all client needs, from award-winning online databases to market reports and statistical reference books. Euromonitor's clients range from leading manufacturer's, retailers and suppliers of consumer goods, to international investment banks, management consultancies, advertising agencies and students at top business schools world-wide.
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