Spotlight on Brazil, digital evolution and the airports of tomorrow at Summit of the Americas

AMERICAS. The first Summit of the Americas, organised jointly by regional travel retail associations ASUTIL and IAADFS, kicked off today in Orlando with a strong opening Executive Conference Session. This morning’s discussions were moderated by The Moodie Davitt Report Founder & Chairman Martin Moodie.

IAADFS Chairman of the Board and CEO of Motta Internacional Erasmo Orillac welcomed delegates to the new-format event and introduced ASUTIL President and Dufry General Manager Brazil & Bolivia Gustavo Fagundes. In breaking news, Fagundes revealed Brazil’s border store regulation was finally passed on 16 March. We will bring you more on that update soon.

ASUTIL President and Dufry General Manager Brazil & Bolivia Gustavo Fagundes updates delegates on legislative progress in Brazil

As detailed in The Moodie Davitt Report interview with Dufry executives prior to the show, what happens in Brazil’s business climate resonates throughout Latin America (see recent edition of The Moodie Davitt e-Zine).

After a deep economic crisis in Brazil, the country is showing signs of recovery, said Fagundes.

An expected recovery in GDP over the next two years, elections in Brazil and a recovery in the tourism market should positively affect the business, he noted.

An illustration of the economic dynamics that will affect the fortunes of travel retail in Brazil

Airport privatisation in Brazil is also a key trend that is dramatically changing the industry as it increases competition and passenger traffic in the country, he said.

Fagundes highlighted the importance of Latin America in travel retail based on Dufry’s business performance. The region is growing at +50% more than Dufry’s overall growth, revealed in last week’s 2017 company results announcement. The company also achieved double-digit growth across its operations in Peru, Chile, Uruguay and the Caribbean last year.

Latin American highlights from Dufry’s 2017 annual results

Fagundes updated delegates on two key positive movements in Brazil for the industry – the passing of border store regulation on 16 March which will see duty free stores opening inside the country, and the increase in the arrivals duty free allowance from US$500 to US$650.

The 23 locations on Brazil’s border where land border duty free shops are expected to open

“In Latin America, two-thirds of the business comes from arrivals duty free but the allowance is limiting. For 27 years Brazil’s allowance has been $500 but this is damaging. We cannot continue to keep up with [consumer demand with this limit],” Fagundes said. “The good news is two important countries – Uruguay and Argentina –  have already increased their allowances.”

Fagundes closed his session with an important message – that ASUTIL remains a strong trade association and continues to look out for the interests of the industry in Latin America. “Let’s make our industry even stronger,” he said.

‘Quaternity’ concept

Next up, AOE Founder and Chief Executive Kian Gould took to the stage to talk about the evolution of digital trends in travel retail.

The industry is facing a critical challenge, with travellers buying less at airports.

Kian Gould: Towards a hybrid shopping model

“There is a shift of people moving from impulse buying to planned purchases. Airports are becoming more efficient, but this has an impact on retail because it reduces the ‘golden hour’ of buying,” he said. “The duty free market is contracting. The market is still growing but spend per passenger is not.”

On a global average, 71% of travellers are making planned purchases at airports compared to just 29% buying on impulse.

He highlighted the importance of getting to know passengers before they travel and introduced a new ‘quaternity’ concept for travel retail – an update on the Trinity concept. He noted that airlines only have information on around 10% of passengers so collaboration between them, brands, retailers and airports plus sites like Trip Advisor is crucial.

The Moodie Davitt Report Founder & Chairman Martin Moodie (left) discusses the digital evolution with Kian Gould (right)

Such learnings have already been applied to the commercial offer at Frankfurt Airport where AOE has introduced an omnichannel solution. Gould noted the incredible growth achieved at Frankfurt, which has resulted in a +230% increase in average basket size driven by omnichannel retailing, he claimed.

He added that while digital won’t replace physical retail, it is where the future lies. “An airport has to become a true digital place, everything mobile and everything at your fingertips.”

A 360-degree journey

Portland Design Director of Environments Lewis Allen emphasised how the industry needs to engage the customer before, during and after their visit to the airport.

For too long travel retail has been guilty of a ‘one size fits all’ model of shopping, said Allen. “The internet will not kill shops, it will liberate them,” he emphasised.

Lewis Allen: The industry needs to engage with the customer before, during and after their visit to the airport

To create a better customer experience, Allen introduced the concept of 360-degree journeys – where engagement with travellers occurs before, during and after the journey and via digital, analogue (such as activations) and human touch points.

“We need to create journeys where people get exactly what they want, when they want it,” he said. Digital solutions such as apps are key to engaging passengers before they travel, with consumers expecting retailers to use the latest technology.

At the airport, the industry has ‘digital distractions’ to compete with, such as live streaming programmes like Netflix. Allen said food & beverage will have a huge role in rethinking the airside commercial experience. “Let’s not create separate food courts, let’s create environments where [retail and F&B] sit side by side,” he said.

Creating full multi-sensory experiences will be key. “Stores don’t always convey that deep category passion or knowledge. [You need to] bring people into your brand and into your world.”

Once the customer has left the airport, it is important to continue to engage with them. “Trusted brand allies are key. They are our last point of touch with the consumer and [that connection] will be how the experience will be remembered.”

…and react like a ninja – the future of airport concession spaces.

Overall, the future airport journey needs to create all those lines of experience for an aligned journey. Allen’s closing remarks summarised the future of concession spaces (see slide) with an additional comment – the travel retail channel also needs to “react like a ninja” to constantly keep pace with consumers.

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