Heathrow ‘Passenger Ambassadors’ Secretly Encouraging Chinese Travelers to Spend Money at Airport Stores

Chinese woman reading the STC magazineAn investigative report by the United Kingdom’s Channel 4 revealed that Heathrow Airport’s 250 passenger ambassadors—service staff helping travelers at the airport—are actively trying to entice tourists to spend money at airport stores. Passenger ambassadors, who were revealed to earn commission from promoting airport stores’ special offers, were found to often actively pursue Chinese travelers as they are identified as the most likely customer segment to spend big inside the airport.

The Channel 4 report, titled Dispatches: Inside Britain’s Airports, unveils that Heathrow Airport’s passenger ambassadors are responsible for what can be considered unethical behavior. By using hidden cameras and undercover reporters, reporters found that, rather than helping passengers, Heathrow’s passenger ambassadors were eager to nudge tourists toward shopping at the airport’s many stores and restaurants. The Daily Mail, which also sent reporters to the airport to investigate, had one if its reporters ask a passenger ambassador for help to find her gate, only to find the ambassador ignoring the question and instead recommending where to find the “best shops and restaurants.”

In a segment of the Channel 4 report, one of Heathrow’s passenger ambassadors described that after successfully encouraging a traveler to spend money at one of the stores, store clerks would provide information on the amount spent by the traveler, which is then recorded in a terminal. According to the report, Heathrow ambassadors have the target of generating up to 4,000 GBP (US$4,960) in sales every day, with one ambassador claiming to have generated sales for as much as 10,000 GBP (US$12,403) in a single day.

Some airport ambassadors interviewed for the report also admitted to actively targeting Chinese tourists, since they’re perceived as more likely to spend substantial amounts of money in the airport’s retail outlets. The report by the Daily Mail further corroborates this claim and describes one of Heathrow’s passenger ambassadors seen “pursuing a man of Chinese appearance for 100ft, while a couple was forced to ignore another ambassador as she skipped beside them gesticulating outside the Cartier store.”

According to the job description that an undercover reporter received when applying for the job, “the majority of the role will involve interacting with passengers, persuading them to shop if they had not planned to, or encouraging them to spend more by talking to them about offers and promotions.” In contrast, a spokesperson for Heathrow airport described the practice as follows: “We provide fantastic restaurants and stores in order to offset the cost of running the airport, which keeps the cost of air fares down. Passenger ambassadors are an important part of our business, and we expect the team to put the needs of passengers first.”

While some experts interviewed for the investigative piece questioned how ethical it is to use employees who are described as there to help travelers for promotional services, none questioned the legality of the practice.

In the United Kingdom, the growing number of Chinese travelers that the country receives is perceived as a crucial engine for growth in the retail sector, particularly after the Brexit referendum which saw the British pound plunge in value against the Chinese yuan. With countless media reports describing Chinese tourists as “flocking” the country for luxury shopping as the value of the pound dropped, it should perhaps not come as a surprise that sales promoters working on a commission basis actively target this particular customer segment. For airport retail, just like other sectors in the tourism and retail industries, Chinese travelers is a customer segment to be reckoned with—with initiatives that encourage further spending among Chinese travelers potentially extremely lucrative.

Source: Jing Daily / Channel 4

Major duty-free stores yet to be affected by dwindling Chinese tourists over THAAD deployment

Young Chinese shoppers - China Elite FocusSouth Korea’s major duty-free shops have been operating in the black in recent months despite the number of Chinese tourists declining over the country’s plans to deploy an advanced US missile defense system, industry sources said Monday.

Chinese travel agencies in recent weeks spent sales of tour packages to South Korea as part of the Beijing government’s retaliation against Seoul’s decision in July to have the Terminal High Altitude Area Defense system deployed on South Korean soil later this year. South Korea says the missile system will not target China but only counter threats from North Korea.

HDC Shilla Duty Free said it posted a surplus of 125 million won ($107,982) on 53.2 billion won in sales in January.

It is the first time the joint venture between Hotel Shilla Co. and Hyundai Development Co. recorded a monthly surplus since its opening in December 2015.

HDC Shilla also had 1 billion won in operating profit on 67 billion won in sales in February.

The company suffered 20.9 billion won in operating deficit on 397.5 billion won in sales last year.

Shinsegae DF said its Myeongdong branch in downtown Seoul recorded an operating profit of 1.2 billion won on sales of 75 billion won in January in the first operating profit since last May when the Myeongdong branch opened.

Hanwha Galleria, an affiliate of Hanwha Group, and Doota Duty Free Shop, run by Doosan Group, said they have been improving in recent months with their daily sales surpassing 1 billion won each.

Hanwha Galleria logged an operating loss of 43.8 billion won and Doosan a loss of 30 billion won last year.

The duty-free industry, however, may face tough business conditions in the coming months when the country is expected to receive fewer Chinese tourists in the aftermath of the Chinese government’s retaliation.

“The current geopolitical climate between Korea and China is certainly an issue for Korea’s duty free and retail industry.” declared Pierre Gervois, CEO of China Elite Focus, and Publisher of the STC magazine, a travel magazine in Chinese language.

Chinese clients account for about 80 percent of the sales for South Korea’s duty-free shops, according to industry data.

“We are trying to come up with measures for stainable management of the business while refraining from excessive and cutthroat competition to achieve sales and profits at the same time,” a HDC Shilla official said. (Source: Yonhap)

Travel Retail Ready for Chinese Shoppers

Chinese shoppers - Luxury Hotels of AmericaLuxury brands are stepping up the battle for travelling shoppers with more outlets at airports and on cruise ships, tapping into one of the fastest growing sections of the market that looks set to keep booming thanks to soaring numbers of Asian tourists.

Revenues from travel retail, which also includes sales on airplanes, rose 9.4 percent in 2012 to $55.8 billion, according to a market study by Generation Research.

It should reach $60 billion this year and nearly double in size by 2020, the study forecast.

“This channel is becoming very important,” Bruno Pavlovsky, chairman of Chanel’s fashion business, said. “Customers are spending time in airports where the environment has become increasingly sophisticated.”

The French luxury brand, the world’s second-biggest behind Louis Vuitton by sales, has boutiques in four Asian airports and one at London’s Heathrow, and next year will open a boutique in Paris Roissy Charles de Gaulle airport and another in Dubai.

Kering’s Gucci, which like mega-brand rival Louis Vuitton has suffered a slowdown in the past two years partly due to emerging market shoppers’ growing preference for logo-free products, has opened boutiques in the same locations recently.

Tourism spending is up 12 percent worldwide since January while spending by Chinese tourists in Europe is up closer to 20 percent, according to data from tax-refund company Global Blue.

According to Pierre Gervois, CEO of China Elite Focus Magazines LLC, the publishing company owning the Shanghai Travelers’ Club magazine “Chinese shoppers want to differentiate from regular shoppers in Mainland China who can’t afford to travel. Buying luxury good overseas shows that you belong to the community of affluent consumers who can buy in Paris, London or New York – and not in a Beijing store with a generally bad customer service and the fear of having counterfeit goods, even in official flagship stores”

Chinese tourists, who barely featured in luxury brands’ customer statistics a little over a decade ago, now make up 29 percent of global luxury spending, consultancy Bain & Co said in a report published this week.

That trend is set to continue, with Boston Consulting Group (BCG) forecasting nearly half of all air traffic in the medium term will come from the Asia Pacific versus 37 percent now.

Though most luxury brands raised prices, particularly in the euro zone and in Japan, to make up for currency moves, Bain estimates that over two thirds of luxury spending by mainland Chinese was made overseas in 2013, due partly to local duties.

According to Renaissance Capital, Europe remains the cheapest market for handbags with price 9 percent below those in Hong Kong and 28 percent below mainland China, while the yen’s weakness has played in favor of luxury shoppers in Japan.

BCG expects the Chinese travel market will grow at a compound annual rate of about 11 percent from 2012 to 2030.

Chinese urban travelers took about 500 million domestic and outbound trips in 2012, spending about $260 billion, and it expects those numbers to increase to 1.7 billion trips and $1.8 trillion in spending by 2030.

Hermes, which has 50 boutiques in airports around the world, is turning these into proper free-standing shops to better tap the booming market.

“This channel affects customers that are more interested in luxury than the average,” said Patrick Albaladejo, deputy managing director of Hermes, adding that travel retail represented a “significant” portion of the brand’s total sales.

L’Oreal, the world’s biggest cosmetics group and maker of Lancome creams and Yves Saint Laurent lipstick, created a division last month dedicated to travel retail, which it described as a “sixth continent.”

Sales from travel retail generate 15 percent of total revenues at L’Oreal’s luxury division and 12 percent for rival Guerlain, the perfume and cosmetics brand owned by LVMH.

Perfume and cosmetics represent the biggest product category for travel retail with 28 percent of the market, according to Generation Research, ahead of wines and spirits with an 18 percent market share, fashion and accessories with 13.5 percent and watches and jewelry with 12.2 percent.

LVMH, which owns Louis Vuitton, is planning to launch in 2016 a new retail concept called Galleria, specially designed for travel luxury shoppers, first in Venice and then perhaps in Paris, in the former Samaritaine retail building which is due to be converted into a five-star hotel.

Sales from LVMH’s travel retail network, which includes duty-free shop chain DFS and Sephora cosmetics shops, another popular tourist destination, saw like-for-like growth of 19 percent in the nine months to September 30. The boost included contributions from LVMH’s new DFS concessions in Hong Kong.

By comparison, sales from LVMH’s fashion and leather goods, the bulk of which come from Louis Vuitton, rose by only 4 percent during the period.

China Travel Retail’s event in Shanghai from the 24th – 25th July 2012

China Travel Retail (CTR), the most focused networking event for travel retail brands, concessionaires and retailers targeting Chinese travellers, unveils the lists of world-class speakers and companies that will be involved in its inaugural event taking place in Shanghai on 24th and 25th July, 2012.

Joining the Moodie Report Founder & Chairman Martin Moodie, who together with Deputy Publisher Dermot Davitt will moderate proceedings, will be a host of world renowned industry speakers and panelists.

“We are delighted to have so many well respected industry speakers and companies participating at CTR”, said Jeffrey O’Rourke, Chief Executive of Ink. “This world-class line up of speakers, the superb agenda and the number of Chinese airports and duty free operators already attending, is fast establishing CTR as a definitive date in the Travel Retail calendar. We are hoping that over the coming weeks we will be able to announce more high profile speakers, delegates and sponsors coming to shanghai in July to attend our event”.

The China Travel Retail event and exhibition, taking place at the prestigious Marriott City Centre in Shanghai, will showcase best practices both domestically inside China, at Chinese airports and airlines, at sea, as well as how companies are successfully selling to Chinese consumers travelling overseas.  The two-day schedule for this event will include a mix of keynote speeches and master classes.

“Affluent Chinese travellers are looking for a better quality of service during their duty free shopping experience, and a better selection of products. In particular, they are looking for limited edition watches, or rare premium spirits, and not only from well known brands, but from more exclusive brands”, said Pierre Gervois, Chief Executive Officer of China Elite Focus.

“We believe that there is a need for an event that does not just showcase existing best practise within Chinese travel retail, but also helps companies to network, develop relationships and establish a footprint in this ever increasingly influential market”, said Nick Tan, President of GIS Events. “At CTR we will be bringing together for the first time, the most important decision makers from the Airports, Airlines, Duty Free operators, brands and Concessionaires in china and looking to break into this market.”