After a 30-year run, the world’s biggest airport retailer, Dufry, has been ousted from its top Australian location, Melbourne Airport, by South Korea’s Lotte Duty Free. The air gateway is the country’s second busiest for passenger traffic and a key location for travel retail beauty sales.
Following a very competitive tender in which six of the largest duty-free retailers in the world took part, Lotte was awarded a 10-year duty-free license for the international terminal’s almost 39,000 square feet of departures and arrivals retail space.
Lotte said that it plans to expand the stores it takes over from Dufry to 62,400 square feet and hopes to generate sales upwards of $220 million annually.
In a statement, Melbourne Airport’s Chief of Commercial Property and Retail, Andrew Gardiner, said, “This is the first time we have changed duty-free operators in 30 years. The quality of submissions showed exceptionally high standards. Lotte offered a new store which mirrors the look and feel of Melbourne, with a sense of place that put their proposal on the ‘top shelf.’”
Dufry—in which Alibaba has a stake—will hand over to Lotte on May 31. Lotte has been expanding its international footprint since the pandemic as it seeks a bigger global presence.
Lotte Duty Free CEO Ju Nam Kim said the Melbourne Airport store would become a focal point for overseas expansion, and marked the retailer’s chance “to step up to become a leading travel retailer in the Oceania region.” Last year, the South Korean retailer opened a flagship downtown duty-free store in Sydney featuring more than 100 beauty brands.
While details of the product categories breakdown have not been revealed for the new Melbourne Airport concession, perfumes and cosmetics are expected to feature very prominently to drive volume sales and higher margins.
Gardiner hinted that the financial element of the Lotte bid was an important factor in its selection: “Clearly, having been closed for almost two years due to COVID, financials were an important attribute, but just as important is the ability to offer our customers a thrilling shopping experience through duty-free exclusives, competitive pricing, and excellent customer service. Lotte convinced us of their ability to deliver against all these criteria.”
Lotte can leverage its Chinese expertise
Lotte Duty Free Oceania CEO Steve Timms has promised “a new level of excitement to the duty-free experience” at the airport, driven by in-store and online activity with more digital interaction.
Melbourne Airport suffered badly during the COVID pandemic, dropping to third place for passenger numbers behind Brisbane Airport in 2020/21. While it regained its number-two position behind Sydney Airport last year, Brisbane remains a threat as it is the main international gateway to the Gold Coast, which has become popular in recent years, especially with Asian tourists. The airport now has 23 non-domestic connections.
Lotte’s arrival at Melbourne Airport comes just as Chinese outbound travel is back on the agenda after the country dropped its zero-COVID strategy and opened its borders on January 8. The gateway’s international traffic is now at 70% of pre-COVID levels, and high-spending Chinese—with whom Lotte has deep expertise in its home market, especially in luxury beauty—are returning.
China Eastern Airlines, Xiamen Airlines, and the country’s largest carrier, China Southern Airlines, have either resumed or stepped up services from mainland China to Melbourne already. Others like Sichuan Airlines, Air China, and Beijing Capital Airlines, are also planning restarts.
Melbourne Airport’s Chief of Aviation, Jim Parashos, said: “By March we’re hopeful of being at almost 50% of pre-pandemic capacity from mainland China. While very welcome, this also underscores how much further we have to go.” The return is almost certainly going to impact beauty sales disproportionately at the airport after two very lean years.
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