Travel retail in focus: Asian spirits

Asia travel retail has been the bastion of luxury – but does this need to be reassessed in the era of currency fluctuations, austerity measures and shifting demographics? It’s time to redefine luxe.

The Asia Pacific region is as diverse as it is lucrative

The geographic darling of the travel retail and duty free world, the Asia Pacific region is as diverse as it is lucrative. From the super-league shopping airports and luxurious downtown stores, to cruise/ferry ports and the growing network of celebrated border shops, the discerning travelling consumer can source their spirit of choice from more retail environments than ever.

Asia Pacific is also a region prone to generalisations, despite its vast expanse. China can dominate conversations, often justifiably so: a top statistic to come from the excellent TFWA China’s Century Conference last year was that just 4% of Chinese citizens own a passport. The potential is immense. And with burgeoning middle classes in the likes of Indonesia and Vietnam, there is no shortage of budding shoppers as passenger numbers swell. But how can retailers and brands best harness this spirits sales potential against a backdrop of increasing austerity, currency fluctuations, and the real risk that, in a luxury environment, many prospective customers could be priced out?

First of all it’s about understanding theintricacies of the region, says Vinay Lamba, purchasing director, Heinemann Asia Pacific. “‘Asia’ is quite large and consumer behaviour in one part differs quite significantly from consumer behaviour in other parts. For example, China is a big market for Chinese white spirits and Cognac, however Taiwan is one of the largest markets for single malt whiskies. South East Asia is big for brown spirits with an emphasis on whisky.”

Balancing this awareness with a channel-specific understanding is essential. “In South East Asia, which is where most of our business lies today, one of the key differences in the spirits offer between airports and borders in Asia is of course the price points. Borders see much more traction in the entry level spirits, while airports see a much larger offer on premium products,” he continues. “We should also not forget that shopping allowances among the different countries play a key role in deciding consumer behaviour, too.”

ARI Auckland: Pricing people out of the market could represent a “real danger”

With some of the biggest airports in the region offering the most luxurious approach, does this remain compatible with the increasingly price-conscious consumers? Tim Fulton, liquor buyer at ARI Auckland, says pricing people out of the market could represent a “real danger”.

“Ultimately we want to ensure that there is always ‘something for everyone’ including the lower end spirit, all the way through to ensuring that we are always well stocked with the high-end Cognacs and whiskies, as well as hitting price points in between,” says Fulton. To achieve this, he ensures his range includes travel retail exclusives, and he looks to give an equal emphasis to standard/premium products alongside the ultra-premium-plus bracket.

“It is a balance, as having too much of one product mix is really problematic, i.e. driving spend down or alienating your customers with product that is priced too high so they just don’t want to shop with you. Sales numbers can tell you a lot, but spending time with customers on the floor can also shed a lot of light on the wins and opportunities as far as ranging goes.”

Diageo GTME acknowledges ‘luxury’ can no longer be exclusively about price

Diageo Global Travel Middle East (GTME) is “committed to setting the standard in luxury retail” but acknowledges that ‘luxury’ can no longer be exclusively about price. “We have seen a change in the passenger mix; we know that less affluent shoppers are travelling more and we realise that in order to appeal to this new passenger force, whilst still delivering for the more seasoned and affluent traveller, we need to work harder than ever to offer an attractive, diverse portfolio,” says Peter Fairbrother, global marketing director, GTME.

“We also know the important role our brand ambassadors play in engaging with consumers and helping them to make the right choice, which is why we offer a continued educational and capability building training programme that ensures our sales force are able to offer the best advice to all customer demographics.”

In the current environment of currency volatility, pricing is a more sensitive issue than ever. Diageo GTME cites this, along with shifting passenger profiles (“In 2011, 66% of Chinese passengers departed from Shanghai, Beijing or Guangzhou; by 2015 this had dropped to 26% with the balance flying from less affluent ‘second tier’ cities which clearly impacts purchase intent,” says Fairbrother, citing Air4cast figures) as the biggest challenge.

“We realise the ongoing global volatility is unlikely to change, this is becoming ‘the new norm’, and that we need to work harder than ever to deal with unpredictable movements across categories and geographies going forward, as well as working closely with our retail partners to build this positive value proposition.”

Asia is still the jewel in the global travel retail crown – but failing to adapt to the new consumer dynamic is a risk. As Fulton concludes: “It is the job of the retailer to deliver this without alienating the other customer groups – that is the real challenge!”