E-commerce potential limited until travel returns
While e-commerce presents a lot of opportunities in global travel retail, its potential is limited until international travel recovers, the CEO of Pernod Ricard Global Travel Retail has said.
Travel retail has been severely impacted by the Covid-19 pandemic throughout 2020. Speaking to The Spirits Business last week, Pernod Ricard Global Travel Retail (GTR) chair and CEO Mohit Lal said the outlook for 2021 “varies quite a lot”.
As companies have adapted to the challenges the pandemic has created, many have put a greater emphasis on e-commerce. Pre-pandemic, e-commerce in GTR was already a key focus for Pernod Ricard GTR, whose brands include Jameson Irish whiskey and Absolut Vodka. But while GTR remains important to the group, Lal said there is only so much e-commerce can do to help the channel rebound while passenger numbers remain down.
“Travel retail for alcohol is duty free sales, largely speaking, except for intra-EU sales, which are duty paid, which requires international travel to happen,” Lal said. “For the time that international travel stays down, there is only so much potential of what e-commerce can do because the product still has to be collected at the airport, so you still physically need to be there at the airport.
“For us, what this crisis unfolds is an opportunity in how we target people before they travel in order to stimulate them into shopping in travel retail – and in there lies the opportunity. What’s happened is that we had a large portion of our traveller base that had smart phones when they travel, but not all of them were familiar with online shopping when it came to smart phones.
“What this crisis has done, is a lot of people who never did any e-commerce shopping in their regular lives have now got used to e-commerce shopping. Therefore, the pool of travellers that you can now target effectively, using digital means to engage with your brands before they travel has significantly grown as a percentage of the total traveller base.
“And in that lies the opportunity for further growing the level of footfall and diversion for travel retail because the crisis has got a lot more people used to using digital technology to shop.”
Companies must be ‘agile’ in GTR
Looking to the future of the GTR channel for the rest of 2020 and into 2021, Lal said the overall size of the channel will correlate to passenger numbers that go through the channel.
In order to succeed in this space, Lal stressed the need to remain agile and move with travellers and consumers wherever they go.
“Depending on which data you look at, you could see depression of 50% versus normal to 25% versus normal, but the truth is this range of recovery is also quite true when you try to look at what’s happened within countries, as opposed to international travel, because the situation remains very fluid.
“These are times of uncertainty but rather than worry about uncertainty, we need to have clarity in terms of how we address this uncertainty, which is getting a lot more agile to be able to respond to this crisis when things go down, or to be able to respond to opportunities when they rise and start to go up.
“We will see great fluctuation in businesses when we look at them more narrowly, market by market. But overall, I think you will see some signs of restarting of businesses but not really strong recovery through 2020 and again in 2021; one has to watch what happens.”