A new report by the Business of Fashion highlights the growing impact of travel retail on the UK market, with sales growing 12% in the past few years.
Growing international travel by Chinese, Russian, Indonesian and Thai tourists is helping to support travel retail and a holiday-to-shop mentality – whereby consumers make purchasing goods a key activity in their vacation schedules.
Speaking to the Business of Fashion, Exane BNP Paribas’ head of luxury goods research, Luca Solca, said: “Travel retail has been growing at about 12% in the past few years. A similar growth is expected in the next two to three years, putting it at double the growth rate for the luxury goods market.
“Travel retail is significant for the broader luxury market. We calculate that travel retail is worth about 15% of the broader personal luxury goods market.”
Before 2005, American and Japanese tourists were fuelling growth but now Chinese and Russian customers are the more important travel retail customers.
Global Blue vice president Manelik Sfez, added: “China accounts for 27% of the total market and Russia for 15%. Number three is Indonesia with 4%. It’s really linked to GDP per capita. As soon as GDP per capita starts to rise and people have more disposable income, they want to travel, and when they travel, they want to shop. For 82% of Chinese travellers, shopping is their number one priority, dropping to 56% and 48% respectively for Middle Eastern and Russian consumers. The Chinese consider shopping a fundamental part of their travel experience. They are the sixth continent for the retail industry.”
For jewellery retailers this means understanding where customers originate from and adapting sales techniques, language and services to suit their needs.
Additionally, airports are increasingly becoming major sales centres, with Heathrow welcoming 70million passengers in any one year. Equally, Dubai airport has more than 60million passengers passing through its terminals, but this figure is expected to rise to 90million by 2018.
London Heathrow travel retail consultant Muriel Zingraff, explains: “In Dubai and in Abu Dhabi, they’ve taken a clear decision that travel retail is of huge importance. The square footage that has been dedicated to retail has made the airports a lot bigger and more like huge shopping malls. The Middle East is expecting to pretty much double their global airport sales.”
This has changed the way airports generate revenue, with 60-70% of all revenue gleaned from non-aeronautical sales in places like Hong Kong and Seoul. In 2012 European airport revenue from retail was deemed to be $10.6 billion (£6.1bn) by Global Airport Retailing.
This shift in focus to travel retail is expected to impact airports and travel hubs as well as city centre retailers who want to attract visiting tourists. Experts recommend introducing tourism-marketing techniques, to ensure potential customers know of your brand before they leave, rather than trying to grab them when they arrive.