Chinese Tourists Help Fuel Luxury Boom in Airports

on August 23 2012 | in Retail | by | with No Comments

Chinese airport

Generation Research released a study last month, reporting that global luxury sales in airport duty-free stores will grow 25 percent in the next two years, reaching $44.5 billion. But airports are already noticing the uptick today: Heathrow announced an increase of 8.8 percent to 1.7 billion pounds, or $2.67 billion at current exchange, year-on-year in March.

“Gone are the days of grubby airport retail,” says Nick Roberts, retail director of Mulberry. The brand has operated multiple stores at Heathrow for the past 15 years. “We’ll open a unit in Frankfurt in October, and we’re looking at airports in Munich, Zurich, Amsterdam and L.A., which are all aiming to bring in luxury names. All of them are looking at the growth in luxury spending and reviewing their retail portfolios.”

Sabine Fagan, the executive vice president of purchasing for Aelia, agrees. “Airports are already — and in the future this will be all the more so — terrific international windows for boosting brands’ awareness worldwide.” Fagan’s company is the central buying unit for the duty-free activities of Lagardère Services Travel Retail, which operates airport retail in over 20 countries, most notably at Paris-Charles de Gaulle.

Luxury retail centers in airports are proving most attractive to the Chinese. “Their level of spending dwarfs everyone else’s. They represent 1.7 percent of all passenger numbers at Heathrow, and are responsible for 8 percent of turnover,” says Muriel Zingraff, retail concession director for Heathrow.

Brands such as Bulgari have created products especially for the Asian customer such as watches with a cherry-blossom design on the dial, which “regularly sell out” at Heathrow.

Fagan pinpoints the growth to “new high-spending customers from Asia, Russia and Brazil. The highest spend per head in fashion accessories is by the Chinese, the Japanese and, depending on the brand, Koreans, and people from the Middle East.”

Fragrances are generally the top selling category at the airports.  Fagan adds, “Fashion is number two, with watches and leather goods being the biggest sellers, especially among Chinese customers.”

Roberts says that the four Mulberry stores at Heathrow are visited by 4,000 customers daily – a number that not even the Bond Street store sees. However, the average average spend per customer is the same as Bond Street, although the prices are 20 percent lower, in keeping with BAA, Heathrow’s airline operator’s request, to cut at least 15 percent off of retail prices to entice customers. “We treat the stores like flagships, and we consider them our windows on the world,” says Roberts. Mulberry keeps about 55 percent of the stock at Heathrow from seasonless merchandise, while 45 percent is from the current season.

While Mulberry reports seeing a broad, international clientele, Bally says its consumers are mostly Asian, who typically spend an average of $500 to $1,000 on large leather goods.

Fagan believes she has the answer to why it is so easy to spend in airports: “Aside from the clear price advantage when buying duty free, many customers find it much less intimidating to buy at the airport than on the high street, because most shops have an open front and offer easy access to products. According to all our passenger surveys, customers are often in a different mind-set when they travel; more open to discovery and more open to self-indulgence and gifting. As a result, they are more demanding, and they expect a genuine shopping experience.”

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image credit: chris

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