One of the most successful retail operations in the aviation industry, Dubai Duty Free finished 2003 with sales of $380 million, a figure that places it among the top two or three operations in the world, says DDF managing director, Colm McLaughlin.
It’s a figure the operation is aiming to top up 20 per cent, with a 2004 target of $440 million, and, like McLaughlin says, there’s no reason to doubt the achievability of that figure.
That’s a far way off from the tiny venture that began exactly 20 years ago with 100 people and first-year sales of $20 million. “In those years, most duty free operations around the world had only a few traditional sales items such as alcohol, tobacco and perfumes. In our first year, alcohol and tobacco together accounted for 34 per cent of our sales. In 2003, these two types of products accounted for just under 20 per cent of our sales, although the volume has grown considerably. This means that our other products have grown even more,” says McLaughlin, pointing to another barometer of just how far they’ve come: in year one, they employed 100 people (64 of whom remain), now there are 1,100 staff on the payroll.
The product category that has seen the most growth, expectedly, is gold, a Middle Eastern preference that has increased to account for 12-13 per cent of total sales. Perfumes and cosmetics combined are another 12-13 per cent, while confectionery brings in 11 per cent. “We sell a lot of computers, PCs, PC games and we sell 80-90,000 mobile phones annually,” says McLaughlin. In 2003, the DDF racked up three tonnes each of gold and caviar, 500 tonnes of Kit-Kats and two tonnes of nuts every day in sales. In other numbers, that’s 35 million units of merchandise and an average of 30,000 transactions a day.
McLaughlin says the category whose growth surprises him the most over the years has been confectionery, which soared from two pert cent of sales to 12-13 per cent. Some product categories see growth in cycles, in particular electronics. “Five years ago, for instance, we would have sold 5,000 more mobile phones than we do today. A few years ago we had some Polish flights coming through the airport and all the passengers wanted to buy tape recorders.”
New items introduced over the years, like sports goods and cigars have sold well. Luggage and watches also move considerably, but of course, repositioning often helps shift items that are moving slowly. For example, says McLaughlin, the DDF moved its sunglasses shop last year and saw sales grow 51 per cent - because people were going on holiday and the new shop was in the middle of the traffic flow.
Running a successful business like the DDF, then, depends on a number of elements. “We are fairly good at what in the duty free world is termed penetration. Most airports sell to 15-20 per cent of departing passengers, we sell to 42 per cent. We do that because we are positioned very well and it is a huge advantage being owned by the Dubai Government. Our boss, Sheikh Ahmed bin Saeed Al Maktoum, is the president of Dubai Civil Aviation, a hard worker and commercially astute and gives the Duty Free tremendous freedom to run commercially,” he says.
In addition, the company has a large product range, offers good value for money and has a well-trained staff. “We spend a lot of time and money to ensure our staff is extremely well trained to be good sales people, good PR people and to have good product knowledge.”
The final business secret, of course, is to earmark budget space for marketing - and McLaughlin’s team spends 4-5 per cent annually of its total revenue on pitching DDF, Dubai and the airport to the world at large.
Some of which, of course, that marketing has been the sports sponsorship of international events, which has not only helped bring people to Dubai but also to promote the UAE abroad. The event McLaughlin enjoys the most, personally, is the Dubai Tennis Championships. “The first is a fairly small event started 12 years ago. It is a tournament we initiated for the duty free industry. The first tournament saw about 20 overseas visitors. They pay their own way here and we treat them, while they are in Dubai. At the last tournament recently,100 people attended from various countries, all involved in the duty free business. The other sponsorship, which is very big for us, is the Dubai Tennis Championships, which always attracts a lot of very good players and we get a huge amount of publicity from the championships. It is a very great promotional event for us. We are told by the experts that if we had to buy the television time generated by the championships, it would cost us $120 million,” says McLaughlin. “We have built the tennis stadium, which cost us $7 million, but we use it for other events such as concerts and other venues. Around the tennis stadium, we have built the Irish Village and the Century Village and the whole complex has been very successful.”
The big question, of course, is whether a duty free operation like Dubai’s could be replicated. Over the years, says McLaughlin, several individuals and airports have asked for assistance, mainly because they believe it to be an easy way of making a lot of money. “At one stage we made an offer to buy the duty free operation at Colombo Airport in Sri Lanka and we were outbid. We also put a tender in to run the duty free in Beirut at the new airport and were again outbid. We did some work at the duty free operations in Jordan, not at the airport, but at the border shops called Jordan Duty Free, there are around 14-15 shops, and we helped them at cost price. The problem is that our own business has grown by about 2,000 per cent in 20 years, so we are really too busy to take on any more.”
With Dubai International Airport undergoing tremendous expansion, the DDF expects to have an additional 12,000 square metres of retail space, in addition to the present figure of 6,800 square metres, when the concourse and terminals two and three are finished. In 2003, 18 million people used the airport. It is estimated that by 2010 there will be 35 million people coming through the airport. McLaughlin says sales estimates by the year 2007 should have risen above $600 million. Naturally new consumer areas are being explored, such as dedicated areas for fashion, music booths, eye testing facilities, blood testing amenities and clinics.
None of this, however, means that the operation’s best loved features are going away. Since its inception in 1989, the company has delivered 1,100 cars in the duty free car raffle - and the programme will continue, assures McLaughlin, who says the millenium millionaire promotion will also continue. “It began in 2000 and we only intended for it to run a short time, but people seem to like it, so we will continue with that promotion as well. We have created 34 dollar millionaires, while the promotion has been running.”
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