Shop while you fly

The airport is not the only place travellers can find great deals on duty free products – shopping onboard can be even more rewarding.

Whether you’re a shopaholic who can’t resist a bargain or you’re just looking for the perfect gift for someone, buying something from the duty free offering onboard could guarantee that you get value for money. According to Selwyn Grimsley, Chief Executive Officer of Tourvest Duty Free, international duty free purchases totalling an impressive US$34bn were made last year. He said that products found in the onboard duty free catalogue can be up to 45% cheaper. “At least 20% of our products can make this claim. We benchmark our prices against the local market,” he added.

International statistics released by Generation Research stated that forecasts indicated that in 2010 global duty free and travel retail sales will reach US$37bn, which was the same level as in 2008. Last year is regarded as a ‘lost year’ because of the global economic recession. Global duty free and travel retail sales fell by 6,8% in 2009.

The results for the first half of 2010 show that global duty free and travel retails sales reached close to US$18,9bn. Compared with the first half of 2009, sales on wine and spirits increased by 13,9%, fragrances and cosmetics 15%, tobacco 6%, confectionary and fine food 13,6% and luxury goods 21,2%.  Over the same period, sales in Africa increased by 13,6% and accounted for 1,6% of overall sales. Purchases onboard the various airlines worldwide increased by 11,3%. While most duty free purchases were made at airports (which account for 58,9% of the sales), airlines had a significant share of 6,6%.

Airports vs. Airlines

As indicated in the figures above, the majority of duty free and travel retail sales are made at the airports located around the world. Grimsley said Tourvest Duty Free benchmarked their prices against those in airports and on the high street. On average, he said, the products onboard are 10% cheaper than airports, but can be up to 45% cheaper than local market prices. “Purchasing products in-flight is very attractive from a pricing point of view,” he added.

Grimsley pointed out some of the constraints of operating onboard, which included space and weight limitations. He explained that usually around 200 items can be carried, which obviously gives the customer less choice. This, combined with the constant improvements being made to retail offerings at the airports, increased competitive rivalry. Grimsley said Tourvest Duty Free has had to develop a new strategy to compete, and would soon make the purchasing of products online available to travellers before they fly. He explained that passengers would be able to use either frequent flyer miles or credit cards to purchase the products they want online and would receive them on the flight. “This will make it possible for us to reach the passengers before they travel and before they get to the airport,” added Grimsley

Looking at Africa

When looking at the worldwide statistics, Africa makes up a fairly small percentage of all purchases, but since the majority of Tourvest Duty Free’s clients are African airlines, it is an important market. Tourvest Duty Free currently provides onboard shopping for Virgin Atlantic, Kenya Airways, Air Mauritius, SA Express, SAA, Arik and Interair, while it is aggressively looking at new airlines to expand its services.

On its African routes, Grimsley said 65% of Tourvest Duty Free’s sales are fragrances and watches. He explained that duty free worked well in Africa due to the scarcity of supply on the ground, particularly to and from destinations like Luanda and Lagos, where the sell-off rates were extraordinary. High duties in domestic markets further fuelled demand on these routes. He said while cigarettes were a big seller in most destinations they accounted for only about 1% on African carriers. The highest sellers were ladies’ and men’s fragrances and jewellery.

During the World Cup, a test was run which saw Tourvest Duty Free moving away from its traditional gadgety electronics to introduce a more contemporary range including MP3 and MP4 players, with the leading item being a Telefunken smart phone with free-to-air television broadcast capability. Grimsley said this was the best seller during the tournament, and would now be included in the range.

The right products

Tourvest Duty Free, said Grimsley, had a specialist buying team that attended various trade shows and fairs and were up to date with the latest trends. He said that with the new development of electronics, these products were doing well, as was the Pandora Brand and other costume jewellery. “We sell about 10% of all the products loaded on a flight, which is really good because of the quick turnaround times,” he added. Products were changed every six months with about 40% of the items being replaced, enabling frequent flyers to access newness in the product offering.

During recessionary times, Grimsley said, consumers were looking for more and more value for money and that it was therefore important to look at products with lower prices within well-known and trusted brand portfolios. As consumer spend has seen a dip, they are increasingly looking at ways to get the most value out of their purchases and, with the main advantage of purchasing in-flight being the lower prices of branded products, it is clear that this is what gives companies like Tourvest Duty Free the competitive edge.

Reasons to shop in-flight

*Value for money: prices are between 10% and 45% cheaper than local prices

*Convenience: travellers can shop while sitting back and relaxing on a flight

*Lack of availability: some of the products available are not easy to find on the ground in certain cities.

Top selling products

According to the report by Generation Research, the top five product categories in duty free and travel retail in 2009 were:

1)      Women’s cosmetics = US$4,3bn

2)      Women’s fragrances = US$ 4,1bn

3)      Confectionery = US$ 2,5bn

4)      Cigarettes = US$ 2,2bn

5)      Men’s products = US$ 2,1bn

Duty free allowances