DFS follows Chinese tourists to boost sales
With big-spending travellers venturing farther afield, duty-free giant aims to open outlets at key destinations to build on local strategies
The world's largest duty-free retailer DFS Group will add more outlets outside Asia as mainland travellers, who now contribute more than half of the firm's global sales, find tourist destinations farther away from home.
Mainland tourists, who barely made an impression on DFS' income even a decade ago, had overtaken the Japanese as the biggest customer group for the company, DFS chief operating officer Michael Schriver said. Overall sales grew more than 165 per cent in this period.
Japanese tourists now account for just 20 per cent of the company's revenue.
The 83 million mainland tourists who went overseas last year spent US$102 billion, replacing Americans and Germans as the biggest overseas spenders, according to China National Tourism Administration.
In the first five months of this year, the number of outbound tourists jumped 17.3 per cent year on year to 37 million, on par with the growth last year, the agency said.
Hong Kong remained the biggest tourist destination for mainland outbound tourists. The city's contribution accounts for more than a fifth of total sales at DFS and will rise to 30 per cent this year. The "conversion rate" of shoppers to buyers at DFS Galleria in Sun Plaza, Tsim Sha Tsui, showcases the potential of the market.
For every two shoppers at the store, one makes a purchase. "Mainland tourists who come to Tsim Sha Tsui have a very clear objective [to shop]," Schriver said.
Mainland customers in Hong Kong generate more than 70 per cent of sales.
The enthusiasm of mainland tourists is yet to show signs of flagging. But the economic slowdown would affect sales, though slightly, over time, Schriver said.
DFS, which operates in 14 cities, recently opened outlets at Hong Kong International Airport. It saw year-on-year growth in sales at the airport compared with its three predecessors. The firm started the airport operation in November when it took over 80,000 square feet of retail space from the three previous duty-free operators at the airport.
To direct more traffic to its shops at the airport, DFS has installed two "Lan Kwai Fong bars" at the east and west departure halls.
"Just imagine, if we can divert 1 per cent of the traffic in the airport to our shops," Schriver said.
Hong Kong airport handled 5.6 million passengers last year, up 5 per cent from a year earlier.
Schriver expects double-digit growth in its airport operation this year from HK$5.1 billion in sales generated last year by previous duty-free operators. He also said the firm was looking at some new destinations out of Asia for expansion as a growing number of mainland tourists were travelling farther.
GZL International Travel Service, the No1 outbound tour agent on the mainland, said the number of tourists visiting the United States rose at least 30 per cent in the first half of this year.