Luxury groups seek out new shoppers

06 July 2012

NEW YORK: Luxury brands such as Estée Lauder, Hublot and Ralph Lauren are seeking to attract a new generation of international consumers from emerging markets.

Estée Lauder, the beauty group, currently has products in almost 1,000 airport stores, and is attempting to expand this reach across smaller cities in countries like China and Brazil.

"It is an area that is growing in terms of traffic and therefore in terms of sales potential," Olivier Bottrie, Estée Lauder's president, travel retail worldwide, told Reuters.

Hublot, a unit of LVMH making luxury timepieces, is following a similar strategy in Frankfurt. It has also found Chinese shoppers are driving sales at existing such stores in Switzerland. "The Chinese love buying when they travel –  it's a culture," Jean-Claude Biver, its chairman, said.

The Global Business Travel Association, the industry body, has estimated that 100 airports should open in China during the coming decade, serving the country's burgeoning middle class.

"Specifically, what we're seeing ... within China is increased travel and purchases internationally, especially from  ... consumers from Shanghai, Beijing going more overseas," Victor Luis, president of Coach Retail International, said.

Roger Farah, chief operating officer of Ralph Lauren, suggested that the company is still trying to catch up in China having recently taken full control of its operations from a franchisee, but could yield wider benefits from doing so.

"As those customers travel, they're looking for the brands that they have learned over the last ten or fifteen years signify quality and heritage, and their knowledge of our brand is much lower and incomplete," he said.

"Many ... luxury brands are reporting European sales of 25%, 30% or 40% to Chinese. Our Chinese tourist business in Europe is less than 2%. So we believe that we'll get the multiplier effect as we push out in China over the next three-to-five years."

According to Generation Research, the insights provider, duty free and travel retail sales for luxury, cosmetics and perfumes rose by 28.3% from 2008–11, and should expand by 25% from 2012–14, hitting $44.5bn overall.

It is not just developing economies that are securing such attention. Tiffany & Co plans to unveil an airport store in Berlin next year, while Brookstone and Estée Lauder both took space in the $1.4bn terminal opening in Atlanta in May.

Ralph Lauren is seeing the benefit of this approach. Farah said: "When we track by country where our international tourist business is here in the United States, the Brazilians rank very, very high."

Not all firms, however, are as positive. "When I look at American airports, there is just no sense of trying to create in many of them a nice store," Tim Parker, CEO of Samsonite International, the luggage brand, said.

Data sourced from Reuters; additional content by Warc staff