BW Confidential - Issue #4 - October/December 2010 - (Page 60)

Travel retail Market analysis A game of two halves The downturn has exposed fractures in the travel-retail channel that are likely to deepen, and the business is now looking in two directions by Kevin Rozario eauty players may be witnessing some cracks in travel retail’s previously flawless make up. The fault lines appear to be between the eastern and western hemispheres, with players looking east for growth and west to maintain volumes. While this may be a simplistic overview, this is how strategies are being played out as brands look to rebuild lost business last year. The market performance of travel retail in 2009 was poor, but hardly surprising given the economic conditions seen across the globe. According to Swedish analyst Generation, the overall market tumbled to $34.5bn from $37bn in 2008, a 6.8% decline. Beauty sales at $10.63bn fell proportionately by 6.7%, but on a regional basis the differences were significant. For example, Europe and the Americas fell by at least 11% while Asia Pacific saw growth of nearly 7%. The Middle East’s decline was in line with the average decline in beauty. The same trends can also be seen in the first half of 2010. According to Generation, for total travel retail, Asia Pacific was up by 26.3%, while Europe lagged far behind with just 4.4% growth. The Americas bounced back with 22.4% growth (but mostly from Latin and Caribbean markets) followed by the Middle East (+18.4%). Overall, beauty rebounded by 15%, ahead of every other product category in the channel. Asia-driven rebound This rebound is heavily skewed to Asia Pacific, where beauty has strengthened its grip on the travel-retail market. At prestige skincare house La Prairie, managing director worldwide travel retail and distributor markets Maike 60 B Kiessling comments: “There is one main reason for the pick-up [in Asia]: Chinese travelers. It’s also down to the fact that operators in this region are extremely dynamic.” She did not says which ones, but Nuance Watson in Singapore and Hong Kong, DFS and South Korean retailers like The Shilla and Lotte are all successfully leveraging demand for beauty and skincare in particular. Chinese travelers are also big spenders. “Chinese travelers are looking for the most expensive products,” comments L’Oréal luxury products marketing director for travel retail Olivier Teboul. The group’s Génifique serum from Lancôme has done so well in the channel that L’Oréal released a 100ml version in the Hong Kong market in August. Spain-based beauty group Puig agrees. “In some regions, Chinese passengers are now topping the charts in terms of spending,” comments Puig travel retail marketing director Lyndea Dew. This will probably continue as more Chinese travelers take to the air on the back of the fast-expanding economy. For example, at Nuance-Watson Singapore’s 24 perfumes and cosmetics stores at Singapore Changi airport, sales from mainland Chinese travelers increased by more than 40% in 2009. This growth was in part due to a strong promotional strategy, which allowed the firm to finish the year with positive growth, despite a 1.3% decline in passenger numbers at Changi. This year beauty at Changi has grown by double digits. Nuance Watson Singapore category manager for beauty Chillie Por says: “We expect the beauty business to continue its upward trend. The company says it will further push “theatrical newness”, similar to its recent pop-up initiative with MAC and event with Ralph Lauren Fragrances, where brand ambassador Nacho Figueras visited the stores. In Hong Kong, Nuance Watson (HK) general manager, licenses Lay Leng Tan adds: “We see a positive outlook for travel retail. The crisis in 2008/09 was a ‘test’ to prove and strengthen our elasticity in a market of continuous uncertainty.” Sales follow traffic Although beauty sales in travel retail have grown at more than twice the rate of international passenger numbers in the first half (see table) it is accepted that growth will, in general, follow the pattern set by the aviation October-December 2010 - N°4 - BW Confidential credit: stock.xchng

Table of Contents for the Digital Edition of BW Confidential - Issue #4 - October/December 2010

- Brand & retail news recap
- Digital digest
- Companies on the move
Take note
- Market facts, figures & trends
Best of BW
- Highlights from our e-publication
- The latest in fragrance, skincare & make-up
- BPI president Rémy Gomez
Insight: fragrance
- Category overview
- Retailing
- Industry viewpoint
- New opportunities
- Launch roundup
- Airport Spas
- Spa case studies
- New store concepts
Travel retail
- Market overview
- Retail strategies
- Interview: World Duty Free & Aldeasa
Show preview
- TFWA World Exhibition
- Six up-and-coming beauty brands
Market watch: India
- Country overview
- Industry roundtable
- Retailing analysis
- Sector outlook
- Sustainability
Last word
- Mintel head beauty consultant Nica Lewis

BW Confidential - Issue #4 - October/December 2010