THE SALES CHANNELS - THEIR PERFORMANCE 2008

By Doug Newhouse, 10 July 2009

Other shops, which include downtown, border, seaport and diplomatic outlets etc., accounted for sales of $9.8bn and a market share of 26.7% in 2008. This was a 2.1% increase in local currency unit sales over 2007, although the sector lost 1.3 percentage points in market share against other channels. Airline sales came in next at $2.6bn representing a market share of 7.2%. This translated into a 0.9% sales improvement over 2007, although the sector lost 0.4 percentage points in market share against other channels. The inability of this channel to make real tangible market share progress against the airports sector in particular remains a problem and especially considering the very significant extra retail space that has come on line over the last year with many new airport terminals.
 
Meanwhile, the ferry sector followed just behind the airline segment with total sales of $2.5bn in 2008 - or a 6.9% share of the global total. Interestingly, this sector grew by 4.1% in local currency unit sales terms last year, although it still dropped by 0.2 percentage points in market share against all other channels - also reflecting the strong growth elsewhere in airport sales in particular.
 
This sector could see growth in future at the expense of the airline sector however, as the world's biggest ferry operator Tallink builds its ferry fleet in the Baltic and continues to expand and improve its retailing.
 
While the subject of markets is dealt with in a separate section in this analysis, it is also perhaps instructive here to note the top 25 countries in sales terms last year, since this obviously dictates the type of sales channels that are dominating the overall market (i.e. countries with little or no ferry sales, those with border shops, and/or those with a high prevalence of airport sales).
 
Briefly - and in general terms - the $3bn sales markets in 2008 (in order and with their market share in brackets) included the UK (8.6%) and South Korea (8.4%), while the US/Americas market (7.4%) was the sole entry in the $2bn bracket.
 
Markets that accounted for $1bn-plus sales in 2008 included the following: UAE (3.9%); France (3.4%); Germany (3.2%); Hong Kong (3%); Singapore (2.9%); and the US Virgin Islands (2.7%).
Sales in the $800m category included the countries of Spain (2.3%) and China (2.3%), whilst Japan (2.1%) and Norway (2%) sit in the $700m segment.
 
Countries that recorded sales of $600m-plus included Italy (1.8%), The Netherlands (1.8%); Estonia (1.7%); and Russia (1.6%). Those with $500m were led by Finland (1.6%), followed by Denmark (1.6%); Thailand (1.6%); Turkey (1.5%); Brazil (1.5%); Sweden (1.4%); and Australia (1.4%). The only market in the $400m-plus category was Puerto Rico (1.3%).
 
Returning to the sales channels themselves, airports accounted for 70.4% of all sales in Europe last year, followed by 16.1% of sales on ferries, 9% on airlines and 4.4% at other outlets (numbers are rounded).
 
In The Americas it was a different story, with 60% of all sales made in 'other' outlets (downtown, border etc), followed by 34.6% at airports, 4.7% on airlines and 0.8% on ferries.
 
Airport sales dominated again in Asia & Oceania accounting for 57.3% of the continent's sales, followed by 'other' outlets with 36% (and DFS Group's outlets were a big factor here) and airlines with 6.7%. The airports' sales contribution was even more marked in The Middle East with an 81.1% share, in which Dubai, Beirut, Bahrain and Abu Dhabi airports were the main contributors. In addition, other shops contributed 13% of sales in The Middle East followed by airlines with 5.9%.
 
Looking forward, it seems likely that the airports and 'other' sales channels look poised for the most growth in market shares at the expense of the airlines and ferries' categories in particular. Many new airport terminals and much retail expansion took place in 2008 where the true sales pull through has yet to be seen on a fully consolidated annual basis.

At the same time, DFS Group is also well positioned to benefit considerably from the opening and consolidation of new off airport facilities in Macau, as well as the pull through from the huge retail improvements at its downtown Chinachem Galleria in Hong Kong. These latter off airport stores are so successful - especially its two Gallerias in Hong Kong - that they cannot fail to influence the off airport market share in the short term at least and even in the current tough economic climate.