By Nadia Khan
With the growing recognition of the contribution of airport retail, more and more duty free outlets in the region are polishing their operations to encourage passengers to shop. Already a forerunner in airport retail in the Middle East, Dubai Duty Free is one outlet that looks set for even bigger and better things in the near future.
With airports in the Middle East enjoying the seemingly unstoppable rise in passenger traffic, the local duty free market looks set to have a very rosy future. With further airport expansions planned across the region, sales in airport retail are expected to soar alongside profits for the aviation industry.
As probably the most internationally renowned of the Middle East’s airport retail outlets, Dubai Duty Free needs little introduction. Last year, the operation boasted an impressive average of 42,000 sales transactions per day, achieving annual sales of US$590 million.
Covering over 8000m2, and growing, the airport retailer proudly holds on to its position as number three in the world in terms of turnover. This success has not passed by unnoticed with the plethora of awards received by the duty free, including the recent Business Traveller Middle East award for ‘Best Airport for Duty Free Shopping’ and the Raven Fox Award for ‘Middle East Travel Retailer of the Year’ for six consecutive years.
Dubai International Airport’s ambitious multi-billion dollar expansion plans are now well underway, with the construction of Terminal 3, Concourse 2 (dedicated to Emirates Airlines), and Concourse 3 due for completion next year. As part of this, Dubai Duty Free is looking at an additional 8000m2 retail operation in Concourse 2 and a further 4000m2 operation in Concourse 3.
Not surprisingly, Colm McLoughlin, managing director of Dubai Duty Free, is very excited about what he promises will be a ‘stunning’ development. Following on the winning design formula of the current duty free based at the Sheikh Rashid Terminal, the new area will have a similar designation of sections and departments. “It will not be as much one unit but spread a little bit more than the present one,” elaborates McLoughlin. “There will be five, six or seven different zones separated in between by lounges or other airport facilities as needed.”
Shopper déjà vu will be further enhanced as the new area will host sections of many of the brand names popular in the existing duty free, although some additional names are also promised.
Expecting to be up and running by the end of 2007, McLoughlin has his hands full with the development and management of the expanded venture. This includes ensuring that all the systems, staff and logistics are taken care of in order to guarantee a slick operation. “Right now we have about 1600 staff in the duty free. By the time it opens, we expect to have perhaps 2500 people,” he says. “Outside of the staff, we have to introduce stock controls, stock systems, pilferage control and proper security. We need to have a logistical system set up whereby we can manage a lot of deliveries.”
Indeed such an ambitious programme requires a serious re-configuration of existing information and management technology systems to cope with the increased volume of business generated by the expansion. “Last year, we sold 52 million pieces of merchandise. We do an average of 42 or 43 thousand transactions every day,” McLoughlin explains. “One of our difficulties is that when we have customers, we very often only have them for 20-30 minutes and we have to make the most of it whilst they are there.”
With the higher volume of orders expected across a larger and more dispersed retail area, warehousing will also have an important role to play for Dubai Duty Free. For this reason, IT and business services company, Enabler, has been called in to design and implement a warehouse management system for the new warehouse, serving all the existing and upcoming retail outlets at the airport.
Management of logistics operations, from bay scheduling of incoming trucks, goods receiving and storage allocation to order picking and distribution to the retail outlets, will be handled by the implementation of Oracle retail warehouse management.
Interfacing the Oracle warehouse management system with Dubai Duty Free’s existing Oracle e-business and merchandise management environment will enable the operation to analyse in real time, improve store allocation and cut supply chain costs. “The key thing for Dubai Duty Free is that it has enormous aspirations and aggressive growth plans. To do that certainly they want to focus on how they can impact their customer so getting availability on shelf in real time is key to them,” echoes Sarah Taylor, retail industry director for Oracle EMEA. Having the supply chain right is fundamental to their success, she says, adding: “They have to grab their customer within a few minutes of them walking into the store, so they have to have that product available for them.”
Grabbing the customer’s attention in such a short time span relies on all the ingredients of good duty free retail coming together to provide the perfect shopping opportunity – streamlined logistics, impeccable customer service, an appealing environment and of course, the right range of products on display. To better understand this ideal scenario, the Middle East Duty Free Association (Medfa) and Tax Free World Association commissioned ACNielsen, an international market research information provider, to study the profile and shopping habits of travellers in the Middle East. Using data collected by Dubai Duty Free, Bahrain Duty Free and Cairo Duty Free, the research was previewed recently at MEDFA annual conference held in Dubai last month.
“We have done various studies on this, such as how long we have people with us, what the favourite kind of merchandise is and even to a certain extent, although it’s difficult to find out, which nationalities buy certain things,” explains McLoughlin, who is also the current president of MEDFA.
With such a hard act to follow, will the new duty free area be able to emulate and indeed enhance the success of the current operation? McLoughlin is positive that its success will be assured by applying many of the same principles and practices that have provided the backdrop to the current duty free’s impressive climb to the top.
“Inhouse, the quality of our staff has been vital to our success. When we started duty free at the end of 1983, we had a 100 people, and 63 of them are still with us, we call them the pioneers,” he laughs. “Of course, the support and freedom given to the operation as a commercial entity by the government and HH Sheikh Ahmed bin Saeed Al Maktoum, who is also the president of Dubai Department of Civil Aviation, has been very important.”
Other factors which McLoughlin believes separates his duty free from other operations include its investment in marketing, promotion and sponsorship, and of course, its value for money to its customers.
In light of the obvious, McLoughlin is quick to point out to the more sceptical that whilst a clear factor in their potential sales growth will be the escalation in passenger traffic growth being experienced in the region, this alone can not account for Dubai Duty Free’s already impressive sales figures. “We are positioned in such a way that all the traffic goes through us and this has been very positive,” he clarifies. “But our growth has been more than just the growth of passengers, and that trend has been there for the last 23 years. We sell to a far bigger percentage of passengers than other airports, and our sale per head is also better. We are now selling in excess $40 dollars per passenger.”
Ranked as one of the world’s fastest growing airports, passenger throughput had risen to nearly 25 million in 2005, a14.1% rise from the previous year alone. With the completion of construction of third terminal and two concourses around the corner, Dubai International Airport is set to accommodate close to 70 million passengers a year compared with its present capacity being 22 million. Having such an impeccable proven record behind them, it takes no stretch of the imagination to envisage Dubai Duty Free laughing all the way to the bank in the near future. But the operation has even bigger plans in the pipeline for the upcoming Dubai World Central International Airport (JXB).
Expected to be the world’s largest international airport, the airport will have an annual capacity of over 120 million passengers and will be 10 times the size of the current airport. And Dubai Duty Free is planning the retail operation. “The first section of Dubai World Central is supposed to open at the end of next year and we will have about 4000m2 of retail space there,” says McLoughlin. “And as time goes on, we will of course increase that as it develops more and more.”
From its humble beginnings in 1983 with sales figure of $20 million, business for the operation is set to go through the roof in the next few years. “We had sales last year of $590 million, we expect at least $700 million this year, $800 million the year after, $900 million the year after that, and we expect to be a $1 billion dollar company in 2009,” McLoughlin pauses, before smiling, “it’s very exciting.”
As possibly one of the world’s fastest developing duty free operations, it’s certainly is a very exciting one to watch out for.