Predictions 2016: Dubai Duty Free executive vice chairman Colm McLoughlin

BY COLM MCLOUGHLIN

Overall, 2015 has been a good year for Dubai Duty Free. We have grown our business and expect sales to be close to $2bn. We have increased our staffing levels to 6,194 from 5,618 and we are set to open 7,000 square metres of new retail space in Concourse D in early 2016. This will be a very welcome addition to the existing retail footprint of 26,000 square metres in Dubai International Airport.

In terms of our global sponsorship programme, we have continued to support major sporting events. These have generated an estimated $1bn worth of media exposure. The Dubai Duty Free Irish open golf tournament, held in association with the Rory Foundation, was a great addition to our portfolio. We have recently signed a further three-year agreement to continue as title sponsor.

Of course, there were challenges in 2015 including the drop in Russian travelers. We estimate this cost us around Dhs 200m in sales with Russian passengers being among the top spenders historically.

The weak euro also impacted our business and there has been a change in the behaviour of Chinese shoppers. They are now not just looking at high-end brands but alternative options.

On the plus side, Dubai International is a major transit hub and we have seen increased spending from other groups such as the African passengers. They grew in numbers last year and the Gulf Cooperation Council and India continue to be key markets for us.

But with challenges come opportunities and we have consistently looked at ways of improving our retail offering to a diverse passenger mix. We have collaborated more closely with our suppliers to ensure that we are delivering the right products at the right prices wherever possible. We have also encouraged our staff to give us feedback on how to drive sales.

We increased our online presence significantly in 2015 and, as a result, our online sales reached around Dhs 50m. We expect that to rise significantly this year.

At the recent Tax Free World Association conference in Cannes, the head of TFWA Erik Juul-Mortensen’s opening address summarised the travel retail industry status.

In short, there is no doubt that these are challenging times for the industry. Based on 2014 figures, the industry is valued at $63.5bn – down from $65bn in 2013. In the first half of 2015, sales of duty free in Europe dropped 9.3 per cent and in the Middle East duty free sales are more or less flat.

As an industry, we have been here before with the security restrictions introduced post 9/11, severe acute respiratory syndrome and the global financial crisis of 2008/9. However, if there is one consistency across the industry, it is that we are a very resilient bunch.

The difficulties that the industry faced in 2015 will remain for the most part in 2016. These include a weakening of currencies against the dollar, low commodity prices and the slowing of the Chinese economy along with the drive against conspicuous consumption in China. In addition, the interest rate rise in the United States will add volatility to financial markets and mean a possible outflow of funds from emerging markets, neither of which will help the industry.

But for Dubai Duty Free, and the rest of the industry, the opportunity is in serving the increasing number of passengers with a better retail offering both in its physical stores and online.

The industry needs to continue improving its customer service on the shop floor, its retail pricing and assortment, and the fulfillment for its online and physical stores. Increased automation and an improved supply chain for the thousands of products sold in the travel retail stores worldwide will be needed.