Business at Dubai Duty Free (DDF) improved again in the first half of 2012 as the aviation world’s single-location uber-retailer reported 11 percent growth in sales from a year earlier. With the same man — Colm McLoughlin, executive vice chairman of DDF — at the helm in since the first day of operations and a corporate narrative approaching legend status, Executive wanted to find out what the venture is up to now. Guess what? More expansions.
Dubai Duty Free has an impressive track record of growth since its inception in 1983. What results do you expect to achieve this year?
In our first full year of business, our sales reached $20 million, which was good. Last year on our anniversary day in December, the daily sales reached $24 million, which is a good indication of how far we have come as an operation. We expect our sales for this year to reach $1.6 billion.
Our staffing levels have obviously grown dramatically over the years and we now have 5,000 employees, including 47 of the original 100 staff that we recruited back in 1983. As myself and George Horan, my deputy and president of Dubai Duty Free, are among those 47, I think that we have done an okay job so far.
Have you ever felt concerned that the good times may not last?
I have always been confident that we would continue to grow and do well. Our turnover has doubled six times since operations began and will double again by around 2018. We have had great support from the Government of Dubai and in particular from H.H. Sheikh Ahmed bin Saeed Al Maktoum, president of Dubai Civil Aviation Authority and chairman of Dubai Duty Free. The challenge, and it is a good challenge to have, is to continue to grow our business and ensure that we retain our position as one of the top duty free retailers in the world in terms of our retail offer and our turnover.
In this respect what are the next steps that you plan to implement? You are already the world’s top duty free operator, are you aiming for further accolades?
It is important for us to retain our position as one of the top duty free operations in the world both in terms of turnover and our retail operation. It is also important to us to retain our role as a ‘Superbrand’ and we will continue to invest in our marketing strategy for this. In terms of our retail operation, we have great plans in place for expansion over the coming months. The opening of Concourse A in the first quarter of 2013 will provide us with an additional 8,000 square meters (sqm) of retail space, bringing our total retail offer to 26,000 sqm. The new concourse will be dedicated to the Emirates A380 fleet. So, we are busy with getting our retail area fitted out and are finalizing our product categories for that as well as recruiting an additional 1,300 staff in readiness for the opening.
We have also extended automation within our Distribution Centre from 70 percent automation to 90 percent. This will ensure that from a logistics point of view we are well equipped to receive and issue merchandise across all terminals.
Chinese travelers are said to be avid spenders on luxury and Russia has been another large source of demand for products at DDF. Are these the customer groups and their interest in luxury where you focus your attention?
Dubai International Airport is a major hub and therefore the mix of nationalities using the airport is huge and it is important that we cater to all groups. The Chinese and Russian travelers are important to us of course, particularly in the luxury goods category, but passengers from the Indian subcontinent and the Middle East are also among our top spenders. It is also important for us to cater to different budgets, we sell over 900,000 kilograms [kg] of nuts for example and over 1 million kg of Nido powdered milk every year, so we have to cater to that customer in exactly the same way as we would a customer purchasing a high-end luxury product.
On your 28th anniversary last December you managed to achieve those $24 million in sales that you mentioned earlier; what record do you expect to hit this year?
The $24 million was a great achievement; it means that we sold $1 million dollars worth of goods every hour. We have anecdotal evidence that passengers chose to fly on December 20th in order to avail of the discount and that is fantastic. We would hope to increase last year’s figure by around 10 percent but we will have to see on the day.
DDF has substantial commitments to sports sponsorship, of which horse racing is a personal favorite. So taking this example, how much does your horse racing sponsorship contribute to your overall success and what value can you put on your image and brand development? Are you planning new sponsorship deals?
Our overall sponsorship program includes horse racing, tennis, golf, rugby, powerboat racing and basketball, among others and is a key factor in our marketing drive. We began our sponsorship of sporting events back in the mid 1980s so were probably one of the early pioneers of sports marketing. Our aim continues to be building up our brand awareness, drive footfall to our retail operation and raise the profile of Dubai as a leading sports and leisure destination.
The Dubai Duty Free Tennis Championships is certainly the biggest event that we sponsor and we actually own the two tournaments on the ATP and WTA tours. The fortnight of tennis results in $325.67 million worth of TV exposure for the event, with $170 million of that focused on the DDF brand. So that is a big investment, which has very clear returns as far as we are concerned.
Horse racing is also a great way for us to fly the flag and our sponsorship of the Dubai World Cup here at Meydan is one of the highlights of our racing calendar. We have worked hard to also build up exposure for our other sponsorships including the Dubai Duty Free Irish Derby held in June in Ireland. This year the print media coverage was extensive and the estimated value was around 1.6 million euros ($2.1 million) alone.
We are constantly approached to look at new sponsorship offers, but we cannot be everywhere and we have to turn things down in order to consolidate our existing sponsorships.
For a retailer and a duty free specialist at that, it seemed a bit unusual that you last year created a new division to manage hospitality operations located deep within the land-side of the customs barrier and expand these operations through the Jumeirah Creekside Hotel. What drove these decisions and are you hedging plans for more properties?
The Jumeirah Creekside, which opened in July, is a fantastic addition to our Leisure Division, which includes The Irish Village, the Century Village, the Aviation Club and the Dubai Tennis Stadium. The 5-star hotel is located within the same complex in Garhoud which of course is also close to the airport.
It made sense for us to look at building a hotel that would be the official hotel for many of our events, including the Dubai Duty Free Tennis Championships. We have no immediate plans for another property.
Perfume, liquor and gold are on your list of top-selling products. Are there products that you feel need working on and what are you doing about it? What percentage of overall sales would you like them to contribute?
There have been significant increases across all major categories including perfumes, liquor and gold. With the new concourse opening next year, we will have the chance to increase our categories and add new brands, which we have been unable to do as a result of space constraints. We think that the fashion and luxury product range can be enhanced and this is being looked at in relation to Concourse A.