INAUGURAL CONFERENCE ON CHINA CLOSES ON A HIGH NOTE

The Industry Conference on China, organised by TFWA in partnership with APTRA, closed on a high note on 7^th March in Beijing after two days of detailed analysis of the development and potential of the duty free and travel retail trade in the country.

Rui Chenggang, Anchor and Director for the CCTV Business Channel presented a powerful, frank and fascinating summary of the business and political landscape in China designed to augment the industry’s understanding of the Chinese consumer.

In total 372 delegates from 200 companies attended this industry association event, which was entitled ‘China’s Century: The Fast Pace of Change in China Duty Free & Travel Retail’.

In his welcome address Erik Juul-Mortensen, President TFWA set the scene with a summary of the aviation market in China and the opportunities open to travel retail. “We are only at the beginning of the air travel boom in China,” he said. “Aviation analysts predict that passenger numbers in China, domestic and international, will quintuple to reach around 1.5 billion by 2030.” “The question is,” he posed, “are international brands ready for this huge opportunity?”

Sunil Tuli, President APTRA added his welcome and echoed the optimism about the opportunities ahead but cautioned that the entire industry should be alert to dangers that may threaten any one category and should work together to protect the interests of all.

Dong Zhiyi, Executive Chairman of the Board of Beijing Capital International Airport, official host of the event, said that his airport, which is already the official gateway to China, has ambitions to become the number one airport in the world.

His colleague Zhang Wei, Vice President BCIA, outlined various measures which will stimulate travel and retail, including a new 72-hour visa-free transit policy, extended retail areas in the terminals and a reformed bidding process enabling BCIA to approach high-end brands on a one-to-one basis in order to secure the desired product mix for their passenger profile.

Charles Chen, Vice President, China Duty Free Group reported an increase in annual revenue at CDFG in 2012 of 30% over 2011 – higher than the growth rate of 21% in Asia Pacific as a whole. During the Golden Week in February, the Sanya Duty Free store achieved revenue of $24 million and on Valentine’s Day alone sales exceeded $4.8m, a 230% increase over last year. He identified cruise ships, the new high speed rail and the purchasing behaviour of Chinese people as future opportunities for growth.

Taking exception to the common description of China as an emerging market, Philippe Schaus, CEO DFS, said it is today a highly developed market with great potential. He said that DFS was built on the wave of outbound Japanese tourists in the 60s and is now adapting to the new Chinese consumer. “When we look at the PRC customer, one size does not fit all,” he said. “You have to be flexible and meet their growing sophistication.”

By 2020 China will be one of the top three inbound travel destinations, according to the World Tourism Organisation, he said. Mr Schaus then took the opportunity to announce that DFS will partner with HNDF (Hainan Provincial Duty Free Co Ltd) at the operator’s first off-airport store at the Mission Hills Tourism Town Center in Haikou, Hainan Island which will be a centre of shopping, leisure and entertainment.

In a fascinating commentary on the evolution of the Chinese economy, James Kynge, Editor, China Confidential identified three factors which will influence the future development of China: urbanisation which is a key policy of the new administration - by 2025 there will be about 25 cities in China with a population of over 500,000; the expanding middle class which will double in size by 2020; and the reforms designed to combat negative effects of growth such as the environmental impact and corruption. He said that although the growth rate is slowing the country still offers enormous potential.

The pursuit of excellence in duty free was the topic addressed by Mark Riches, Retail Consultant in a valuable session chaired by Doug Newhouse, Editorial Director of The Travel Retail Business. He said airports have to get the basics right including knowing the customer, making shopping easy, providing great service and giving the retail area a strong sense of place.

China’s aviation landscape and its commercial potential were analysed by three experts in the region. Peter Harbison, Executive Chairman CAPA – Centre for Aviation summarised China’s aviation policy and its impact on airlines; Wolfgang Weil, Chief Operations Officer, Xi'an Xianyang International Airport illustrated how current commercial development strategies are being put into practice; and John Woodhouse, Head of Business Development, China & East Asia, AerRianta International took outlined the retailer’s perspective and warned that there is still much work to be done to ensure passengers understand the retail offer.

Sunil Tuli, Managing Director (Duty Free) King Power Group HKG, described his company’s 30-year history in China and said that the first opportunity seized by this entrepreneurial company in 1979 is dwarfed by the scale of opportunity in China today. He advocated that travel retailers should take careful note of how Chinese consumers have evolved and cater to their needs.

In a compelling case study Freda Cheung, CEO Canada, World Duty Free Group explained how Vancouver Airport has boosted the influx of visitors from China by implementing a dynamic marketing plan and a commercial offer which is tailored specifically to the needs of this group of high fliers. The airport has achieved extraordinary daily sales with just 600 passengers which exceed the previous daily record set with 8,000 passengers during the winter Olympics 2010.

Emmanuel De Place, CEO, LS Travel Retail ASPAC ended his engaging address on reaching China’s consumers, in which he emphasised that “a generic experience - the ‘cookie-cutter approach - will simply not work”, with the announcement that his company had just been awarded a 1,700sq m luxury and fashion contract at the new domestic Terminal 3 at
Shenzhen Airport which will open later this year.

Heading up the second day of the conference, in an absorbing presentation ‘From Revolution to Evolution’, Andrew Wu, LVMH Group President, Greater China discussed how Chinese consumers have emerged from decades of material deprivation to enter an era of domestic consumption in the space of just one generation.

A panel of three expert researchers explored the nature of the Chinese consumer at home, abroad and on line. Andrew Stockwell, VP Asia Pacific, Forrester Research described the “age of the consumer” in which empowerment of the consumer will revolutionise the way brands and retailers will operate. Viveca Chan, Founder and CEO, WE Marketing Group explored the concept of ‘dai gou’ or buying for self-indulgence versus ‘shai’ where the shopper buys to impress, and the impact these traits may have on travel retail. Finally, Garry Stasiulevicuis, MD, Counter Intelligence Retail offered a detailed analysis of Chinese customer motivations when shopping in duty free specifically.

From his in-depth research into the purchasing motivations of the wealthiest members of Chinese society, known as the ‘Xingui’ or new aristocracy, Rupert Hoogewerf, Chairman and Chief Researcher of the Hurun Report drew some compelling conclusions about the implications for luxury brands.

Representatives of some of those luxury brands took part in a panel discussion of about how they are adapting their approach. Francis Gros, Group Travel Retail Director, Luxottica in the fastest growing category, sunglasses, talked about designing sunglasses to suit Asian faces; CS Lam, Travel Retail Regional Director - Asia Pacific, Godiva International described limited editions destined for Chinese markets; and Patrick Bouchard, Global Travel Retail Managing Director, Puig outlined some of their fragrance and cosmetic products adapted specifically for the Chinese consumer.

Further expert opinion on the concept of luxury in China was provided by a panel including Christian Blanckaert, Professor of Management, ESCP Business School, who considered that European brands would continue to drive the luxury market in the foreseeable future but that the Chinese luxury brands would emerge gradually. Among the observations made by Hans-Kristian Hoejsgaard, CEO, Davidoff was that shopping for luxury goods can be intimidating so the retail environment and education are important. Simon Tam, Head of Wine - China, Christie’s shared insights on China’s high-end wine buyers and said that the biggest difference between the wine cellar in Europe and that in Beijing is that in Europe there is dust on the bottles; in China fine wine is bought to be given and or consumed.

The final member of this panel was Muriel Zingraff-Shariff, Director Retail Concessions, BAA who said that exceptional service, including personal shoppers, has contributed to the airport’s success in selling to the travelling Chinese consumers. Like many other speakers she also emphasised that Chinese shoppers are dedicated users of the internet and BAA itself has responded with a ‘Heathrow Boutique’ reserve and collect service.

In his closing remarks Erik Juul-Mortensen thanked all those involved in organising the event, including the moderators John Rimmer, Michael Barrett and Trevor Lai, the sponsors and the partners. He reported that 112 meetings were organised through the One2One appointments service, which puts airports and operators in touch with brands and distributors.

The Opening Cocktail was held in the stunning Tai Miao Imperial Ancestral Temple on Tuesday 5^th and the Gala Dinner on Wednesday was staged in the Golden Hall of the Bejing Hotel with an artistic performance of ‘The Moving Forbidden City’ by Hu Xiaodan.

The partners supporting the event were Diamond and Gala Dinner sponsor King Power Group (Hong Kong); Diamond sponsor Patrόn Spirits; Platinum and lunch sponsor DFS; Gold sponsor Puig; Silver sponsor Sunglass Hut; lunch sponsor Furla; coffee break sponsors Chivas, Ferrero, Perfetti Van Melle and Toblerone; other sponsors Colorful Licenses International, Kipling and Lacoste.

Ends

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