Now boarding: Welcome to the global shopping mall
Airports are taking a bigger share of a booming luxury goods market – but Heathrow is missing out
Wednesday 10 April 2013
Airports stopped being about flying a long time ago. From Heathrow to Hong Kong, to Shanghai's Pudong, the international traveller is confronted by giant billboards pushing the latest in global luxury: the former Harry Potter starlet Emma Watson implores us to buy L'Oreal's Lancôme, the French supermodel Constance Jablonski tempts us to Estée Lauder, Brad Pitt woos for Chanel. All are competing for the newly bulging wallets of a Chinese middle class travelling abroad in ever greater numbers and ready to spend on the biggest luxury brands that the West has to offer.
For those in charge of the world's biggest airports, the most important thing is to get travellers through security as quickly as possible to maximise their "dwell time" in the new 21st century temples of retail. Getting the planes to run on time seems almost incidental.
Travel retail, centred largely on airports, represents the fastest growing area of a global luxury market that is all but impervious to recession and was worth an estimated €212bn (£180bn) last year. International travellers spent some $50bn (£33bn) last year worldwide, a sum expected to double within six years. They spent $15bn alone on beauty products, which have seen double-digit growth for the past decade.
No wonder that France's L'Oreal – the world's biggest cosmetics company – has labelled the phenomenon a "shopping Eldorado".
The cosmetics giant, under chief executive Jean-Paul Agon, is looking to appeal to a global shopper "defined by where they shop rather than where they're from", according to divisional chief Barbara Lavernos.
These are the Brazilians who flock to the Champs Élysées or the Chinese, Russians and Nigerians whom Harrods counts among its best customers. They are the transient consumers spending an average of $100 a visit in the modern-day megacities that our leading international airports have become.
Last year there were 39 such "cities" handling 10,000 passengers a day. According to industry estimates, by 2030, there will be 87 – a sprawling market as big as a continent in its own right, according to L'Oreal, accounting for more than 10 billion passenger flights every year. We've come a long way from Shannon airport in 1947, and the first ever duty-free store opened by Brendan O'Regan to sell cheap booze and cigarettes. These days, wine, spirits and tobacco account for less than a quarter of the total travel spend: in contrast fashion and beauty now claim more than two-thirds.
The number of new passengers emerging from the Asia Pacific region has jumped 30 per cent since 2007 while the West struggled with the aftermath of credit crunch, financial crisis and recession. Within this fast-growing cohort, the Chinese are the biggest prize. Last year, 70 million Chinese travelled outside the country: next year it will be 100 million.
The aspirational Chinese consumer-traveller does 60 per cent of his or her luxury shopping abroad, and a lot of it is going straight into L'Oreal's tills. The travel retail arm of L'Oreal accounted for about €1bn of global sales last year – nearly a fifth of its Luxe luxury division, which itself makes up a quarter of the cosmetic group's global revenues. Luxe still trails Estée Lauder in the Asian market overall, but in travel retail it is the undisputed number one.
What are they buying? Unlike in the West, where the emphasis is on fragrances and make-up, Asian travellers spend about two-thirds of their cash on skincare products, compared with about a third in the US. A Korean woman will take five times as long on skincare at the end of the day than an American, for example, spending their cash on upmarket products such as Lancôme creams and also skin whitening products. The trend underlines the reasoning behind L'Oreal's bolstering of its skincare offering with the acquisition of Clarisonic, a US company, in 2011. Chinese men are another key target for skincare serums such as Biotherm.
The "new money" desire of aspirational Chinese buyers to splash out on traditional Western brands comes alongside a gifting culture accounting for almost 40 per cent of travel retail spend. While spending on luxury watches and jewellery has fallen away in the past year, largely due to a crackdown by the ruling Communist party keen to display a tough stance on corruption, the beauty segment has been far less affected. "We're not selling €10,000 watches," says Luxe president Nicolas Hieronimus. The fact that 13 of Lancôme's best performing stores are in airports speaks for itself.
But the worrying thing from a British perspective is that London – in particular Heathrow – is missing out on the largesse of the Chinese traveller. Heathrow may be Europe's biggest airport with more than 65 million international passengers last year, but it comes just 18th on the list of airports most frequently visited by Chinese travellers.
Hong Kong is naturally the first destination – due to the ease of travel – but the highest-ranked European airport is Charles de Gaulle, the ninth most popular destination. Heathrow ranks behind Frankfurt, Rome and even Malé in the Maldives – now a booming holiday destination among newly wealthy Chinese – in terms of visits. Experts say the UK's exclusion from the EU's Schengen visa agreement, which bizarrely makes it more difficult for travellers from the world's second biggest economy to get in, is largely responsible. It's an oversight you wonder if the spluttering UK economy can afford.
Despite the slowest growth for more than a decade for the Chinese economy overall in 2012, L'Oreal is convinced that the luxury travel boom triggered by its newly mobile population is set to last. Mr Hieronimus said the surge was "structural not cyclical" as the cosmetics giant and its rivals seek to cash in on rising demand for beauty and luxury goods among citizens of the world's emerging economies. In the "global playground for the global shopper", as Ms Lavernos puts it, from Dubai to Paris to Los Angeles, the Chinese are the biggest players of all.
Top 10 airport destinations
Chinese shoppers 2012:
Paris (Charles de Gaulle)
Biggest beauty spenders
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