WIND­FALL FOR THE LARGEST DUTY-FREE RE­TAILER IN THE SUB­CON­TI­NENT

Delhi Duty Free Ser­vices is on a roll. In­dia’s big­gest duty-free re­tailer achieved its high­est monthly sales in the month of June. There were other wind­falls as well. The com­pany also recorded its high­est daily sales yet, at over $600,000, be­sides reg­iste

Progressive Grocer (India) - - Front Page - LUKE GORRINGE CEO, DELHI DUTY FREE

The month of June went down with a bang for Delhi Duty Free Ser­vices Pvt. Ltd., which runs a clus­ter of duty-free stores at Delhi In­ter­na­tional Airport. The shops re­tail the best in cat­e­gories spawn­ing liquor, to­bacco, con­fec­tionery, perfume & cos­met­ics, and lux­ury ap­parel and ac­ces­sories. All the shops are lo­cated be­tween Ar­rival and De­par­ture junc­tions at Ter­mi­nal 3 of Delhi In­ter­na­tional Airport. Duty-free shops at air­ports sell prod­ucts with­out duty, i.e, with­out the lo­cal gov­ern­ment sales tax added in. At duty-free shops, the size of the duty-free ex­emp­tion varies de­pend­ing on the coun­try, but prices are of­ten com­pet­i­tive in re­la­tion to what you’d find in a nor­mal store. (The types of prod­ucts that duty-free shops sell – liquor, cigarettes, perfume, etc – would oth­er­wise at­tract high ex­cise taxes bump­ing up their prices.)

For Delhi Duty Free, June proved to be a month in clover with sales climb­ing to gid­dy­ing heights, and bring­ing cheer to its three stake­hold­ers. The three part­ners in the joint ven­ture are Delhi In­ter­na­tional Airport Pvt. Ltd. (DIAL), Yalorvin Ltd. – a sub­sidiary of Dublin-based Aer Rianta In­ter­na­tional cpt (ARI), a world-wide pioneer in op­er­at­ing duty-free shops glob­ally, and GMR Air­ports Ltd, which owns and op­er­ates Delhi In­ter­na­tional Airport and Hy­der­abad In­ter­na­tional Airport. As an en­ter­prise, Delhi Duty Free is In­dia’s largest duty-free re­tail space and the Ter­mi­nal it is lo­cated in is the sixth-largest sin­gle

ter­mi­nal build­ing by floor area in the world.

High­est sales in June

The com­pany posted its high­est monthly sales in the past seven years at a time when re­tail­ers across the coun­try were by and large cir­cum­spect ahead of the GST roll-out and were try­ing to shake off a pro­longed mar­ket chill brought about by the de­mon­e­ti­za­tion storm. In the travel re­tail in­dus­try as well, busi­ness sen­ti­ment had re­mained muted. The past 18 months had seen sure signs of a global slack­en­ing in du­tyfree spend. Var­i­ous rea­sons were at­trib­uted for the slow­down, rang­ing from slide in the value of pound ster­ling due to Brexit con­cerns and a con­comi­tant strength­en­ing of the ru­pee against the US dol­lar. “In spite of such ag­gra­va­tions and the in­ten­si­fy­ing com­pe­ti­tion for wal­let share of the In­dian trav­eler, we con­tin­ued to regis­ter growth in sales. Delhi Duty Free was able to build on grad­ual growth dur­ing the early part of the year. We moved to dou­ble digit growth in the past few months and sales hit a record high in June,” says Luke Gorringe, CEO, Delhi Duty Free Ser­vices Pvt. Ltd. He has a par­tic­u­lar and per­sonal rea­son to cel­e­brate the June rev­enue gusher, over US$ 15 mil­lion. The record sales – higher than in the cor­re­spond­ing month last year – comes af­ter he took over his present as­sign­ment at Delhi Duty Free in May last year.

The June wind­fall also saw Delhi Duty Free record its high­est daily sales un­til now, at over $600,000, be­sides reg­is­ter­ing over +50% growth in Shop & Col­lect sales, and high­est ever sales in the beauty and liquor cat­e­gories. In the lat­ter, a record 53,000 bot­tles of duty-free John­nie Walker Black La­bel were sold

in June, which is the high­est recorded

The June wind­fall also saw Delhi Duty Free record its high­est daily sales yet at over $600,000, be­sides reg­is­ter­ing over +50% growth in Shop & Col­lect sales, and the high­est ever sales in the beauty and liquor cat­e­gories. Over the years, trav­el­ers tran­sit­ing through Delhi In­ter­na­tional Airport have come to re­al­ize that Delhi Duty Free of­fers a world class store and shop­ping ex­pe­ri­ence with the best in wine and liquor to to­bacco, con­fec­tionery, perfume, ap­parel and fash­ion ac­ces­sories.

sales fig­ure for John­nie Walker any­where in world at any sin­gle lo­ca­tion. In terms of sales split and best per­form­ing brands, liquor ac­counts for nearly half the over­all busi­ness with John­nie Walker, Pernod Ri­card and Wil­liam Grant among the best-sell­ing brands. In fash­ion and cos­met­ics, the spot­light is shared by Chanel, Dior and Lo­real while Kraft leads in con­fec­tionery. “Cos­met­ics, sin­gle malts, fash­ion prod­ucts are grow­ing very fast at our stores with growth hit­ting above 20 per cent,” says Ab­hi­jit Das, Head - Mar­ket­ing, adding that Delhi Duty Free stores stock prod­ucts in the price range ex­tend­ing from $25 to $4,500.

Liquor is the key cat­e­gory with in­creas­ing num­ber of young In­di­ans mov­ing to­wards sin­gle malts and pre­mium white spir­its. Deluxe Scotch re­mains the big­gest cat­e­gory and con­trib­utes sig­nif­i­cantly to growth of liquor busi­ness. Sim­i­larly, the cos­met­ics cat­e­gory is wit­ness­ing high growth as more women are now trav­el­ling abroad for both work and leisure. Ac­cord­ing to Luke, mid­dle-class shop­pers with high dis­pos­able in­come are in­creas­ingly be­com­ing planned shop­pers. “They do a lot of re­search be­fore em­bark­ing on travel, they look for best value and key brands, and a pre­mium range.”

Pi­o­neer­ing strides in travel re­tail

Ever since it opened in 2010, Delhi Duty Free has been a run­away hit with in­ter­na­tional trav­el­ers. Un­til then, peo­ple had a very poor no­tion of duty-free shops in In­dia. Most such shops were op­er­ated by the public sec­tor ITDC, which lacked the spe­cial ex­per­tise that is re­quired for ef­fi­cient and prof­itable duty-free re­tail­ing. In­dian duty-free shops were thought of as dingy places, clut­tered and shab­bily run. The launch of Delhi Duty Free marked a dra­matic shift in the way duty-free stores were run un­til then. Span­ning 55,000 sq. ft. of re­tail area, Delhi Duty Free of­fers the largest duty-free space in the coun­try.

“We in­tro­duced stores that were a rad­i­cal de­par­ture from the tired and shop­worn con­cept that peo­ple had about duty-free shops in In­dia. Sud­denly, trav­el­ers us­ing Delhi In­ter­na­tional Airport were able to see a duty-free shop that was 25 to 30 times big­ger than the typ­i­cal ITDC stores of yore and many duty-free shops run by other pri­vate op­er­a­tors to­day. Peo­ple saw a store that was large and ca­pa­cious, el­e­gantly de­signed and stocked with an un­be­liev­able range span­ning the most in­ter­na­tion­ally pre­mium brands,” says Das.

In fact, Aer Rianta In­ter­na­tional, which is a partner in Delhi Duty Free, en­joys a ster­ling rep­u­ta­tion for op­er­at­ing some of the best and most prof­itable duty-free stores across In­ter­na­tional air­ports around the world. It is cred­ited for ac­tu­ally in­tro­duc­ing and in­vent­ing the con­cept of du­tyfree shops when it opened the first such store at Shan­non Airport in Ire­land, way back in 1947. To­day, Aer Rianta op­er­ates duty-free stores at 13 In­ter­na­tional air­ports – Mon­treal, Hal­i­fax, Win­nipeg, Bar­ba­dos in the Amer­i­cas; Dublin, Cork, Lar­naca and Paphos in Europe; Abu Dhabi, Beirut, Mus­cat, Bahrain in the Mid­dle East; and

Delhi Duty Free has been able to en­sure a wide range of prod­ucts and an as­sort­ment of world-class brands at bench­marked prices, along with a keen fo­cus on re­tail ser­vice and ex­pe­ri­en­tial re­tail­ing.

Delhi and Auck­land in Asia-pa­cific. Aer Rianta In­ter­na­tional con­tin­ues to ex­pand and was re­cently awarded a num­ber of con­tracts, in­clud­ing one at Abu Dhabi In­ter­na­tional Airport and Que­bec City Jean Lesage In­ter­na­tional Airport.

“Thanks to our long years of ex­per­tise in this busi­ness, we have been suc­cess­ful in mak­ing Delhi Duty Free the most prof­itable duty-free re­tail out­let not only in In­dia but in the sub­con­ti­nent as well. Now that we have been in op­er­a­tion for the past seven years, our turnover is more than the com­bined turnover of other duty-free shops at key air­ports in In­dia. That is the kind of busi­ness we do and that is the kind of growth we have wit­nessed over the years,” says Luke point­ing to the fact that Delhi Duty Free is on way to be­com­ing the fastest grow­ing re­tail ven­ture in the coun­try. “We prob­a­bly have the high­est re­tail sales per square feet any­where in In­dia and in the sub­con­ti­nent. We have been able to achieve a fast break even that could be the envy of other re­tail­ers,” as­serts Luke.

Com­pelling cus­tomer propo­si­tion

Over the years, trav­el­ers tran­sit­ing through Delhi In­ter­na­tional Airport have come to re­al­ize that Delhi Duty Free of­fers a world class store and shop­ping ex­pe­ri­ence with the best in wine and liquor to to­bacco, con­fec­tionery, perfume, ap­parel and fash­ion ac­ces­sories. “Many trav­el­ers from the US, on land­ing at Delhi In­ter­na­tional Airport are flum­moxed to see the in­cred­i­ble range and qual­ity of prod­ucts at our stores. Many can­not es­cape the tinge of buyer’s re­morse. Just imag­ine com­ing out of a long haul 1618 hour flight lug­ging your bag­gage with the good­ies you have brought along only to come up against a store stock­ing all the right kinds of prod­ucts on your wish list and avail­able at much com­pet­i­tive prices. Many can­not be­lieve their eyes!,” points out Das.

Un­til re­cently, Delhi Duty Free was con­cen­trat­ing on sta­bi­liz­ing and grow­ing the liquor, to­bacco, perfume and cos­metic cat­e­gories, be­sides some des­ti­na­tion prod­ucts. How­ever, in the past cou­ple of years, it has added sev­eral new in­ter­na­tion­ally ac­claimed con­cepts, which have made Delhi Duty Free an ex­tremely ad­mired re­tail des­ti­na­tion and com­pa­ra­ble to the duty-free shops in Dubai, Bangkok and Sin­ga­pore. “Due to fast growth of the travel in­dus­try, change in the de­mo­graphic pro­file of trav­el­ers, emer­gence of new tastes, pref­er­ences and shop­ping habits, we need to keep a tab on all th­ese changes by con­stantly look­ing at the trends and through con­sumer re­search and keep evolv­ing our of­fer­ings,” says Luke. To keep in step with the trends, Delhi Duty Free made the in­clu­sion of fash­ion – a much sought af­ter cat­e­gory in travel re­tail – to its range of of­fer­ings. “Our big­gest sell­ing point is that we stock a line of ex­clu­sive prod­ucts and brands at a com­pet­i­tive price and we en­sure that the most sought af­ter brands that trav­el­ers typ­i­cally go out look­ing for

The av­er­age In­dian trav­eler spends $1,200 per visit abroad as com­pared with Amer­i­cans who spend about $700 and Brits who spend about $500.

are avail­able at our stores. In our ex­pe­ri­ence of the busi­ness, en­sur­ing that the right prod­ucts and brands are al­ways avail­able makes a big dif­fer­ence to the busi­ness. If a trav­eler walks into our store and finds that his fa­vorite brand of perfume, malt or cigarettes is miss­ing on the shelves, there is cer­tain like­li­hood that he will not saunter in your store the next time he is at the airport. At the same time, price dif­fer­ence as com­pared to other duty-free shops and mar­kets is the key driver for pur­chase of prod­ucts like to­bacco and cigars,” ex­plains Luke. He adds that on the whole, duty-free shops at ar­rivals do more busi­ness than their peers at de­par­ture. In fact, ar­rivals ac­count for a lion’s share of the busi­ness at duty-free shops. This is be­cause in­bound trav­el­ers like to pick up items on their way back to the city. “The high­est sell­ing

A record num­ber of duty-free John­nie Walker Black La­bel bot­tles were sold in June, which is the high­est recorded sales fig­ure for John­nie Walker any­where in the world at any sin­gle lo­ca­tion.

cat­e­gory in ar­rivals has been liquor. This is pri­mar­ily be­cause the prices of­fered on liquor at the duty-free shops are ex­tremely com­pet­i­tive.”

Op­por­tu­ni­ties and chal­lenges

The sheer size of the rapidly ex­pand­ing mid­dle class guar­an­tees that In­dia’s travel re­tail story re­mains ir­re­sistible for many years to come. The numbers speak for them­selves. In­dia’s mid­dle­class, at 350 mil­lion peo­ple and count­ing is big­ger than the en­tire pop­u­la­tion of the US. Ev­ery year, more than 5.4 mil­lion In­di­ans go abroad to con­duct busi­ness, at­tend meet­ings, take study trips, go on hol­i­days and va­ca­tions, shop­ping tours, cel­e­brate hon­ey­moon and for other myr­iad rea­sons. With more than 20 mil­lion In­dian na­tion­als now liv­ing through­out the world (3.4 mil­lion in the US alone), the vol­ume of out­bound travel has been climb­ing at the rate of about 25% a year.

The In­dian trav­eler is also known for his propen­sity to in­dulge and splurge on trips over­seas. The av­er­age In­dian trav­eler spends $1,200 per visit abroad as com­pared with Amer­i­cans who spend about $700 and Brits who spend about $500. “Thus, our duty-free of­fer­ings have to be bet­ter than other duty-free shops in the re­gion,” says Das. The na­ture of the busi­ness en­joins that if there is a new perfume launched by Chanel, it should be avail­able at Delhi Duty Free. Or if there is global launch of a big sin­gle malt brand, its stores at Delhi airport should be amongst the first in the re­gion to stock it. “While price is a key fac­tor, so is the new­ness of prod­ucts and mer­chan­dis­ing in­no­va­tion, the range and depth of as­sort­ment as well as staff knowl­edge in han­dling the prod­ucts and in­ter­act­ing with cus­tomers. We train our staff for over 45 days ev­ery year with a few go­ing for higher stud­ies as well. All of th­ese are im­por­tant con­sid­er­a­tions in our line of busi­ness and how we per­form on th­ese pa­ram­e­ters help to at­tract valu­able spenders to shop at Delhi Duty Free,” says Luke.

Pay­ing close at­ten­tion to the de­tails has helped Delhi Duty Free am­plify and grow its cus­tomer base. “The in­ter­na­tional style and lay­outs of our stores, brand as­sort­ment, cat­e­gory depth and bench­marked pric­ing (com­pared to other duty-free shops in Bangkok/ Dubai/ Sin­ga­pore, etc.) have helped us cre­ate the de­sir­abil­ity in the minds of cus­tomers,” points out Das. Ex­plain­ing about the re­tail­ing strat­egy, he says that the stores fol­low a sim­ple rule: dis­play the mer­chan­dise as it is done in the best stores the world over. “We fol­low the brand guide­line of each brand but with a rule: all brands must be within the sight­line of the cus­tomer. And the mer­chan­dise must be avail­able al­most at the same time as its launch any­where in the world and at a price that of­fers value to the cus­tomer.”

With the knowl­edge, ex­pe­ri­ence and ex­per­tise of three lead­ing part­ners, Delhi Duty Free has been able to en­sure a wide range of prod­ucts and an as­sort­ment of world-class brands at bench­marked prices, along with a keen fo­cus on re­tail ser­vice and ex­pe­ri­en­tial re­tail­ing. As a re­sult, its stores have gar­nered the no­tice and at­ten­tion of the ad­mir­ing shop­per­trav­eler. Peo­ple in large numbers have taken to check­ing out the stores when pass­ing through Delhi In­ter­na­tional Airport. “Delhi In­ter­na­tional Airport car­ries over 35 mil­lion pax per year and we have a huge and ex­cel­lent catch­ment to cater to com­pris­ing the Na­tional Cap­i­tal Re­gion, Pun­jab, North UP, and Ra­jasthan among some other re­gions. All of it makes for a far more lu­cra­tive mar­ket from a busi­ness per­spec­tive. Peo­ple from th­ese cities are well trav­eled and their un­der­stand­ing of brands and mar­kets is bet­ter than many other parts of the coun­try,” feels Das. He says that it is also a mat­ter of pride for many In­dian trav­el­ers to buy from Delhi Duty Free stores. “Why should some­one buy a bot­tle of Scotch from Europe when you can get the same brand at a more com­pet­i­tive price at our shop? Is it not a ser­vice to the coun­try if you spend your dol­lars buy­ing a prod­uct here rather than spend it on the same prod­uct abroad?”

“The suc­cess of our mar­ket­ing is when a trav­eler de­cides to buy the prod­ucts on his wish-list from the duty-free shop in Delhi in­stead of buy­ing it from a duty-free shop in Sin­ga­pore or Dubai – two of my big­ger and di­rect com­peti­tors. The duty free at Sin­ga­pore and Dubai are big­ger than our stores even though we stock the same range and qual­ity of prod­ucts,” says Das.

It is the na­ture of chal­lenges faced by duty-free shops, which they need to solve with the help of the avail­able pro­mo­tional tools at their com­mand. More than any other re­tail­ing for­mat, duty-free mar­ket­ing has to lean heav­ily on cus­tomer en­gage­ment through tools such as travel re­tail exclusives, new launches, raf­fles and in­no­va­tive gifts with pro­mo­tion (GWP). “We do a lot of in­no­va­tive mar­ket­ing cam­paigns and HR train­ing along­side main­tain­ing an over­whelm­ing re­la­tion­ship with our sup­pli­ers. To in­crease shop pen­e­tra­tion and con­sumer spends, we fo­cus sig­nif­i­cantly on our re­tail pric­ing and have been able to bal­ance the fine line be­tween av­er­age trans­ac­tion value and shop pen­e­tra­tion,” in­forms Luke.

As in many other in­dus­tries, dig­i­tal­iza­tion is chang­ing the way busi­ness is be­ing done. The na­ture of cus­tomer in­ter­ac­tion, too, is con­stantly evolv­ing. “In or­der to reach cus­tomers at the start of their travel jour­ney and in­duce them into mak­ing a pur­chase at their home or of­fice when plan­ning for their travel, we are fo­cus­ing on in­creas­ing our dig­i­tal touch points at the shop level to bet­ter com­mu­ni­cate with shop­pers in in­no­va­tive and dy­namic ways. We are the first du­tyfree re­tailer in the coun­try to ex­clu­sively pro­mote our own mo­bile app and put in place our online pre-book­ing ser­vice with a pre-pay­ment op­tion. At the same time, in keep­ing with the ef­forts to im­prove our cus­tomer ser­vice, Delhi Duty Free has one of the most cus­tomer friendly re­fund / re­turn pol­icy with 24/ 7 cus­tomer sup­port at our end,” says Luke.

To lever­age its dig­i­tal ca­pa­bil­i­ties, Delhi Duty Free in­vests heav­ily in dig­i­tal mar­ket­ing, which com­prises 30 per cent of its mar­ket­ing bud­get. “At our stores, you can pay by Paytm and other kinds of elec­tronic wal­lets, through credit and debit cards as well as by credit card points,” dis­closes Das, adding that the com­pany has also sewed up strate­gic al­liances with key part­ners to drive busi­ness fur­ther. “We have en­tered into al­liances with Jet Priv­i­lege, Paytm, Free charge , ICICI Bank, SBI, Ola, Ya­tra, Thomas Cook and many more play­ers.”

Go­ing for­ward, Delhi Duty Free, which is the big­gest and most awarded travel re­tailer in the In­dian sub­con­ti­nent – it has been a win­ner of the pres­ti­gious travel-re­tail in­dus­try’s “The Fron­tier Awards” and the Asia-pa­cific HR award, among oth­ers – has plans to redo its shops and in­tro­duce many more new brands and ex­cit­ing re­tail­ing con­cepts. “The re­fur­bish­ments have al­ready started and we ex­pect the shops to be ready in phases, be­gin­ning from the last quar­ter of 2017 on­wards. Come Jan­uary 2018, you will see new shops at ar­rival and by mid-year 2018, our de­par­ture shops will be re­vamped,” re­veals Luke who is con­fi­dent about Delhi Duty Free stay­ing on its course of clock­ing dou­ble digit growth whilst it goes through a fresh round of devel­op­ment in the months ahead.

He reaf­firms that the com­pany is poised to con­tinue its growth mo­men­tum with con­tin­ued in­vest­ments in staff train­ing and skills up­grade along­side cre­at­ing new prod­uct of­fers and mar­ket­ing cam­paigns. “I would like to thank our great team, our sup­pli­ers and share­hold­ers and, of course, our loyal cus­tomers who are all key to the suc­cess of Delhi Duty Free. We have much to look for­ward to in the com­ing months with the open­ing of new shops fea­tur­ing ex­clu­sive brands and con­cepts that are go­ing to fur­ther el­e­vate the cus­tomer ex­pe­ri­ence at our stores,” con­cludes Luke.

Un­til 2010, peo­ple had a very poor no­tion of du­tyfree shops in In­dia. Most such shops were op­er­ated by the public sec­tor ITDC. In­dian du­tyfree shops were thought of as dingy places, clut­tered and shab­bily run.

Luke Gorringe CEO, Delhi Duty Free

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