image

Hong Kong International Airport

Less luxury, more affordability in Hong Kong airport duty free shake-up

China Duty Free Group promises to offer ‘more competitive’ prices when it takes over operations on Saturday

PUBLISHED : Thursday, 16 November, 2017, 8:09pm
UPDATED : Friday, 17 November, 2017, 11:04am

Luxury and high-end shopping will be sidelined in a major revamp of the duty free shopping experience at Hong Kong International Airport.

In a bid to make shopping more accessible and affordable, air travellers are being promised cheaper “more competitive” prices, a wider range of items at different price points and “try before you buy” services from the company set to take over the airport’s duty free stores.

China Duty Free Group, part of the mainland’s state-owned China Travel Service, won the concession in a joint venture deal with Lagardere Travel Retail earlier this year, ousting Hong Kong-based retailer DFS Group, part of the luxury Louis Vuitton conglomerate, at one of the world’s most profitable airports.

China state tourism group to run Hong Kong airport’s duty free stores

The contract starts on Saturday and lasts until 2024.

Eudes Fabre, CEO for Greater China at Lagardere Travel Retail, said: “One of the pillars is resetting the price perception of Hong Kong airport. It’s true that in the past, the [airport] catered to the very high-end and luxury.

“Our challenge here is to have these very premium, high-end and one-off items while having an entire range of products that appeal to any type of traveller at any price point.”

The new operator hopes the shake-up will do the trick as Hong Kong bids to up its game in the quest to have the world’s best airport.

“We know that retail and restaurant offerings at airports go a long way to shape passenger perceptions on their journey … Enhancing the shopping experience will make the journey more pleasant, more enjoyable and more distracting,” Fabre said.

“We are deliberately expanding our assortment to different price points, not because people like cheap items, but because of value,” Lee Charn Cheng, chief operating officer for China Duty Free Group, said.

“We have got to make sure that people understand that when they buy in Hong Kong, you are not going to get it cheaper somewhere else.”

Among the new features will be the world’s largest Chinese and Asian liquor stores. Cognac producer Hennessy will also feature its own dedicated store – the first in Asia. A number of dedicated alcohol-themed outlets will also feature tasting bars.

The airport’s new duty free store operator is promising “double the refund” if products are found cheaper at rival airports. Passengers would be refunded twice the difference in price.

How duty free shopping is changing the beauty industry, by forcing it to innovate

In the last financial year, the airport recorded a profit of HK$8.3 billion from revenues of HK$18.6 billion, making it one of the world’s most profitable airport operations, only bettered by London Heathrow.

Some 40 per cent of its earnings came from “retail and advertising,” according to the Hong Kong Airport Authority’s financial report.

The deal allows the joint venture a foothold in the competitive retail sector for the first time in Hong Kong, but also represents another mainland firm flexing its muscles in the city’s business sector.

“It is no secret that the Hong Kong airport liquor and tobacco concession is one of our industry’s biggest contracts,” Fabre said.

China Duty Free’s Lee said he was optimistic about making money from the venture, with the previous duty free operator not able to make higher sales despite the 70.5 million travellers passing through the airport last year.

Fabre also cited a rebound in the city’s economy and growth in mainland visitors to Hong Kong that would contribute to higher sales.

The state-owned travel retailer has ambitions to grow internationally, and currently has 248 duty free stores in mainland China, Macau, Taiwan and Southeast Asia.

DFS chief on its new Venice store and why Hong Kong luxury sales boom is over

DFS Group lost out on the tobacco and liquor contract, while South Korean travel retailer Shilla grabbed the rights to run perfume, cosmetics, fashion and accessory stores from the firm. DFS struggled for years to earn money from its business as falling mainland visitor numbers and a crackdown on luxury items on the mainland had a major impact on sales.

E-commerce at Hong Kong’s airport will also get a major shake-up as China Duty Free will team up with the Airport Authority to start selling products online, so passengers can pre-order items ahead of their flights.