How duty free shopping is changing the beauty industry, by forcing it to innovate
Travel retail is one of the biggest markets for prestige cosmetic brands such as Estée Lauder and L’Oréal, with many new collections now being sold exclusively in airport duty-free shops
One of the biggest events in the beauty industry has just taken place and most people don’t even know about it.
It was the TFWA (Tax Free World Association) World Exhibition & Conference in early October.
Every year, more than 12,000 professionals flock to the French Riviera – to the same convention centre as the Cannes Film Festival – for a five-day global summit on the state of the duty-free and travel retail industry.
Estée Lauder, L’Oréal, Unilever, Procter and Gamble, Shiseido, and Coty all attend, and there’s a good reason why these six industry leaders do so. Travel retail – defined as shopping in airports, in-flight, tax-free stores, and cruises – is one of the their biggest markets.
This year marks a significant milestone for the duty free industry as it celebrates its 70th anniversary. Since the first airport duty-free store opened at Shannon Airport, Ireland, in 1947, travel shopping has become a common part of many people’s journeys.
Today, travel retail is a global industry worth almost US$64 billion. Of that, perfumes and cosmetics account for about one-third of sales, and the Asia-Pacific region is the largest market of all, with a 38.6 per cent market share.
“Beauty products were always important in travel retail, but in recent years they have seen an extraordinary boom,” explains Martin Moodie, founder and chairman of industry news source The Moodie Davitt Report.
“Certain beauty sectors too have boomed. Korean skincare has proved hugely popular with young Chinese travellers; make-up (particularly colour cosmetics) is enjoying a surge of popularity with millennial travellers; and other sectors such as hair care, dermo-cosmetics (a mixture of skin health and beauty) and men’s fragrances are also growing strongly.”
Duty free is also influencing the beauty industry, because the limited retail space in airports forces brands to innovate to stand out. This is accelerating the online/offline integration for retailers too.
At Singapore’s Changi Airport, Lancôme recently introduced the Lancôme augmented-reality virtual makeover app, Virtual Mirror, as an in-store experience. Beauty vending machines, like Sephora and Benefit Cosmetics, also came into prominence at airports.
It’s a place where beauty brands can develop products and create so-called travel retail exclusives such as the NARSissist #Jetsetter Collection.
The rise of a savvier global shopper has meant that brands are increasingly investing in a ‘Think Global, Act Local’ philosophy, says Philippe Lesné, president of Shiseido Travel Retail.
“A strong focus on ‘sense of place’ is key to creating that crucial point of differentiation for brands,” says Lesné.
“An example of this is Shiseido’s ‘The Beauty of Thailand’ campaign, which was tailored for the travel retail channel.
“Our insights revealed Thailand as the number one destination of choice for our key customers, the Chinese travellers, and we capitalised strongly on the ‘sense of place’ concept for this campaign.”
“Sense of place” is a major trend in travel retail, and beauty brands have been cashing in on it. Niche fragrance brand Le Labo (acquired by Estée Lauder Companies in 2014) has built a cult following. Alongside its main line, it carries a second collection of City Exclusive scents that are sold only at its 11 international boutiques.
With the exception of one month each year when Le Labo makes the collection available worldwide, fans normally have to travel to Moscow to buy Benjoin 19, or New York for Tubereuse 40.
This rarity adds to the brand’s cachet. Le Labo makes its travel retail debut this summer in duty free shops in Abu Dhabi.
But perhaps travel shopping’s biggest impact on the beauty industry is that it has created an international “shop window” for brands. In airports, consumers of every nationality are exposed to beauty brands that may have otherwise gone undiscovered.
At The Shilla Duty Free store in Changi Airport, you’ll find Korean beauty brands such as su:m37o and Aupres which you can’t buy anywhere else in Singapore. Shoppers have the added assurance that these products are genuine, often come with a discount, and multilingual staff are on hand to help guide them through the purchase.
Dr Yannis Alexandrides, founder of luxury skincare line 111SKIN, agrees. “We launched the line on British Airways two years ago and also in the duty-free boutiques in Thailand and they’ve proved extremely successful retail channels for us. Travel retail is an excellent market to test the water for luxury items, as travellers are more likely to treat themselves to products with a higher price point.”
It’s a sentiment shared by Moodie, who says: “The sheer number of international travellers creates an extraordinary platform to sell to the world’s most desirable shopping consumers.”