Cruise ship re­vival opens new chan­nels for on­board re­tail

Lux­ury brands are con­coct­ing in­ter­ac­tive ex­pe­ri­ences to lure the next wave of cruis­ers

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY RACHAEL TAY­LOR, FT RE­TAIL & CON­SUMER COR­RE­SPON­DENT

With steam­ing pots of tea and tiny glossy cakes, iced in dis­tinc­tive Tiffany blue, high tea on a World Dream cruise liner is now a jew­ellery sales event.

With steam­ing pots of tea and tiny glossy cakes, iced in dis­tinc­tive Tiffany blue, high tea on a World Dream cruise liner is now a jew­ellery sales event. It is one of a grow­ing num­ber of ex­pe­ri­ences in­tro­duced to ships in re­cent years by cruise op­er­a­tors seek­ing to win more cus­tom from their pas­sen­gers.

The cruise in­dus­try is in rude health. Nearly 27m pas­sen­gers set sail last year, ac­cord­ing to the Cruise Lin­ers In­ter­na­tional As­so­ci­a­tion, with the

2018 fig­ure ex­pected to reach 28m. Pas­sen­ger num­bers have risen about a quar­ter over the past five years. The av­er­age pas­sen­ger is aged 47 — a lit­tle younger than the re­tiree cruiser stereo­type — and they like to shop.

With duty-free sav­ings to be made and plenty of time on board to kill, re­tail has al­ways been an im­por­tant el­e­ment of cruises. Last year, watches and jew­ellery ac­counted for 24 per cent of to­tal re­tail sales aboard cruise ships, ac­cord­ing to an­a­lyst m1nd-set.

This sales chan­nel is be­com­ing more so­phis­ti­cated as brands in­clud­ing

Bre­itling, Chanel and Chopard set up bou­tiques on a range of routes from the Caribbean to Alaska.

“While land-based re­tail is suf­fer­ing from in­ter­net com­pe­ti­tion, cruise re­tail is thriv­ing,” said Beth Neu­mann, chief ex­ec­u­tive of cruise ship re­tail op­er­a­tor Star­board (which de­vised the Tiffany & Co af­ter­noon tea pack­age) in a strat­egy state­ment this year. The group, owned by LVMH, an­nounced plans to ex­pand its em­pire to sell 750 brands across 90 ships by 2020. “The cruise in­dus­try has upped its game in cre­at­ing ships that ri­val the imag­i­na­tion and it’s vi­tal that our re­tail ex­pe­ri­ence does the same,” she added.

While stores aboard lin­ers have what might be con­sid­ered a cap­tive au­di­ence, they do have com­pe­ti­tion from the shops that clus­ter around the ports where the ships dock. Th­ese out­lets fo­cus on dis­count­ing. Where once the cruise ship stores would try to com­pete with them on price, and to an ex­tent still do, there has been a shift to­wards grab­bing con­sumer spend­ing via ex­pe­ri­ences and in­ter­ac­tive sales events rather than through cost sav­ings.

“Cruise re­tail has shifted from the ports, when there was a short time to de­cide and ag­gres­sive pro­mo­tions, to on­board shop­ping, where there is much more chance to im­merse the shop­pers in the brand ex­pe­ri­ence,” says Ed­die LeVian, chief ex­ec­u­tive of US jew­ellery brand LeVian.

Known for its choco­late-coloured di­a­monds, LeVian is part of a re­tail ini­tia­tive launched by Star­board on one of Car­ni­val Cruise Line’s ships.

The con­cept is fo­cused on cre­at­ing per­sonal shop­ping events, which in­clude LeVian’s “Style Me Fa­mous” ses­sions, where its sales staff dress guests up in jew­els, en­cour­age them to pose for pho­tos and give them a gem­stone gift — a cush­ion-cut choco­late quartz worth $100 — in the hope that they will de­cide to pay $99 to up­grade to quartz ear­rings val­ued at $199.

Cruises en­able re­tail­ers to cre­ate a “mem­o­rable buy­ing ex­pe­ri­ence in the age of in­ter­net shop­ping”, says Mr LeVian. “We see the fu­ture of re­tail be­ing de­fined in this fast­paced en­vi­ron­ment where sto­ry­telling [can be] fine-tuned and flex­i­bil­ity is built into the store model. The LeVian store of the fu­ture will be born on a ship.”

Like other brands sell­ing on the seas, Hublot is rolling out ex­pe­ri­ences to cap­ture shop­pers’ at­ten­tion. It sends watch­mak­ers on cruises to run sem­i­nars where guests can, for ex­am­ple, as­sem­ble a watch move­ment.

Richard Guadalupe, Hublot chief ex­ec­u­tive, says his lux­ury watch brand was the first to in­vest se­ri­ously in cruise ship re­tail­ing in 2013 and has seen strong sales growth in the sec­tor in re­cent years. “Cruise re­tail has be­come much more pro­fes­sional, with com­pa­nies try­ing to max­imise rev­enues on­board rather than in the ports,” he says. “It is not the small sou­venirs or gad­gets any more, but a full range of prod­ucts, in­clud­ing lux­ury items.”

For many years, shop­ping in the Caribbean — one of the re­gions where Hublot sells aboard ships — was all about grab­bing a bar­gain, Mr Guadalupe says. “But with the over­all ex­pe­ri­ence go­ing more lux­ury, price is not the only topic any more. It’s all about en­joy­ing the hol­i­days and in­dulging.” Some pas­sen­gers view a lux­ury watch, one that is also per­haps ex­clu­sive to the ship, as a me­mento of their trip, he adds.

Not ev­ery­one is happy about cruise lin­ers’ shift away from price wars with ports, how­ever. Ate­lier Swarovski, which sells through Star­board, says this new fo­cus is dulling sales at sea and fewer “com­pa­nies are of­fer­ing dis­counts, which has slowed the on­board re­tail busi­ness”.

MSC Cruises car­ried 1.97m pas­sen­gers last year and says it has the largest in­house re­tail op­er­a­tion at sea. Watches and jew­ellery ac­count for as much as half of sales on some routes, ac­cord­ing to head of re­tail Adrian Pit­t­away. He ad­mits that shop­pers’ abil­ity to com­pare prices on­line and ag­gres­sive dis­count­ing in ports means prices on­board still need to be com­pet­i­tive. But he says there is growth po­ten­tial in spend­ing qual­ity time with shop­pers.

“Ex­pe­ri­ence is at the heart of cruise re­tail­ing,” says Mr Pit­t­away. “As our ships get more in­no­va­tive, more cre­ative and more ex­pan­sive, so too must we de­velop our ex­pe­ri­en­tial el­e­ment of re­tail­ing so that it is a holis­tic part of the [wider] cruise ex­pe­ri­ence. “In fu­ture, the whole ship can be a shop­ping ex­pe­ri­ence — that is our vi­sion.”

MSC plans to launch 13 lux­ury lin­ers be­tween 2017 and 2026 as part of an 11bn in­vest­ment pro­gramme. Many other cruise ship op­er­a­tors have sim­i­larly am­bi­tious plans.

Se­rial en­tre­pre­neur Sir Richard Bran­son will en­ter the fray with the launch of Vir­gin Voy­ages in 2020. The re­tail con­tract for the ven­ture’s first ship — The Scar­let Lady, an adults-only ves­sel with lux­u­ri­ous in­te­ri­ors — has been handed to Harding Re­tail, which cur­rently op­er­ates 250 stores on 62 ships.

Kat Florence will be one of the jewellers on board. Ms Florence has al­ready found suc­cess on the high seas — she sold a $250,000 gold neck­lace set with di­a­monds and a rare zul­tan­ite gem­stone on board an­other ship in April. She has been charged with de­sign­ing “an in­cred­i­ble mer­maid jewel to mas­cot the boat”.

Vir­gin Voy­ages has vowed to dis­rupt the mar­ket by tar­get­ing fash­ion­able well-heeled pas­sen­gers who would never have dreamt pre­vi­ously of set­ting foot on a cruise ship.

The big­ger chal­lenge will be get­ting them to open their wal­lets.

The deck of Royal Caribbean Cruise’s ‘Har­mony of the Seas’ liner © Bloomberg

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