Beyond the call of duty (free)
Colm McLoughlin, executive vice-chairman and CEO of Dubai Duty Free, visits Khaleej Times as part of our ‘Meet the CEO’ initiative. He shares tips on how to build a world-class retailer from the ground up
Talk about duty free and the first name that comes to mind is Colm McLoughlin, executive vice-chairman and CEO of Dubai Duty Free (DDF). A veteran of 50 years, McLoughlin has been instrumental in positioning DDF at the top of the global duty-free hierarchy. From $20 million (Dh73.4 million) sales in the first year of its operations in 1983, DDF registered $1.85 billion (Dh6.673 billion) in 2016, making the leading airport retailer a star jewel in Dubai’s crown.
McLoughlin sees even brighter prospects for DDF, estimating the group’s turnover at $3 billion by 2022 when the DDF shop at Al Maktoum International Airport will be operating at a grander scale.
“In the first 8 months of this year, we are Dh140 million over our budget in sales. That guarantees the success for the year. I forecast that by 2022, DDF will have a business of $3 billion. I see 9,000 to 10,000 people working for DDF and a couple of more business hotels in the group’s portfolio,” McLoughlin said during his visit to Khaleej Times for the ‘Meet the CEO’ session last week.
Starting his career with Shannon Duty Free, McLoughlin moved to Dubai in 1983 along with 10 other officials at the request of the Dubai government to establish Dubai Duty Free, and the rest has been history. Following the successful launch of DDF, McLoughlin was asked to remain as general manager of operations. Under his leadership, the DDF has won more than 550 — and counting — industry awards.
McLoughlin humbly credits the company’s success to the commitment, dedication and honesty of its employees. “We encourage our employees on advancing their skills and host training events for them. We promote talent internally, therefore, haven’t made senior level recruitment in the past 18 years. We have promoted two staffers as executive vice-presidents and promoted five vice-presidents to senior vice-presidents in different sections like marketing, finance and operations.”
DDF spends about 2.5 per cent of its annual turnover, or $5 million on marketing, advertising and other promotional activities all around the year. “There is no duty free in the world which is even near that.” DDF is an employer of choice for prospective employees, and this is reflected in the fact that it received 99,000 CVs last year.
“We make our employees part and parcel of everything. We have an in-house training department that continuously uplifts the staff. I personally meet and talk to every single new staff member that joins DDF. We have sports, a social club and gym provided for them,” McLoughlin says emphatically.
“Except for one year, we have given increments every single year and we pay bonuses; we have never missed that. Our internal promotions are very important to keep our staff motivated. Our [low] staff turnover has proven that over the last several years. In most of industries like hospitality, tourism and medical, the staff turnover is 28 per cent but our staff turnover is 6.3 per cent — and that figure is for the last 10 years. There are staff members who are there for many, many years. This is paying out to the DDF in the long run. In 1984, we were selling on average $5 per departing passenger; now that average is about $38 — which is again one of the highest in the world,” McLoughlin elaborates.
He points out that DDF also has the lowest shrinkage — which is pilfering and stealing of goods — in the world. “We did apprehend 3,500 shoplifters last year. If you go around the duty free industry in the world, the shrinkage is 1.5 to two per cent; but in our case, it’s 0.08 per cent last year.” Commenting on the implementation of value-added tax from next year, McLoughlin stated sales on departure are anticipated to be VAT-free, however, there is discussion going on regarding sales on arrivals. However, public shops at the airport will not be exempt.
“We are not afraid of that. We are very happy with the introduction of VAT from January 1 as we’ll be different from the other retailers. Around 44 per cent of sales of certain products are done on arrivals; similarly, 16 per cent of our tobacco sales are done on arrivals. Moreover, there will be 100 per cent excise duty on tobacco and energy drinks and 50 per cent on soft drinks. And they will definitely be applied on arrival sales,” elaborates McLoughlin. When quizzed about how DDF stays ahead of competition, McLoughlin prefers a simple formula — be more economical than competitors by benchmarking prices against both local retailers and the duty free shops in other countries.
“We try to be less expensive in the first stage. We concentrate on two things in duty free industry. Firstly, we call it penetration — meaning the number of people we sell it to — and the selling price. If you go to any other major airport, their penetration is about 18 per cent. In other words, they sell to 18 per cent of departing passengers. At DDF, we sell something to 38 per cent of departing passengers — making us number one by far in the world now.
“Secondly, we make sure our pricing is less than the local market; for several products, the markup is only six to seven per cent, if you take mobile and telecoms products, margins on that are much higher. Apple now accounts for 41 per cent of our total electronics sales amounting to Dh240 million. We concentrate on service and values — more than other duty-free players. We do 75,000 transactions every day, give discounts on special holidays and take around Dh18.5 million sales every day,” McLoughlin adds.
It might be tougher to compete at the two fronts — local retailers and duty-free shops in the other countries — but for the veteran McLoughlin, it’s very easy, sounding calm and relaxed while replying to a query during the Meet the CEO session.
“We benchmark our prices with both the local markets as well as other duty-free markets in the world. Our margins would not be as high as in the duty-free industry elsewhere. We do listen to customers, if somebody comes and says this thing is cheaper in Mumbai, we speak to the supplier and may drop the product because this supplier didn’t cooperate,” McLoughlin highlights his success strategy.
— waheedabbas@khaleejtimes.com
We make our employees part and parcel of everything. We... continuously uplift the staff We listen to our customers and their comments... we also monitor all that is being said about us online We are very sophisticated when it comes to technology, simply because without it, we can’t function I have never had a low, every minute of my day has been a high We have given increments every single year and we pay bonuses; we have never missed that I have never been interested in going elsewhere once I had settled in Dubai If somebody comes and says this thing is cheaper in Mumbai, we speak to the supplier and may drop the product