Can duty free survive COVID-19?

Can duty free survive COVID-19?

Will the once lucrative market place bounce back, and how?
Joe Bates

17 July 2020

Publication: Issue 168

How does a retail business manage to survive when its flow of customers has dried up almost overnight? This is the existential conundrum which now faces the $75 billion duty free industry. The COVID-19 crisis has made the prospect of an international flight an impossible dream for so many erstwhile travellers like me, who are now grounded within their homes for weeks and maybe months to come.

Once-bustling international hub airports, handling tens of thousands of travellers a day, now resemble ghost towns. The trade body Airports Council International has conservatively estimated that airport passenger traffic will plunge nearly 40 per cent in 2020, the equivalent of 3.6 billion travellers. In most cases, airport stores have been forced to close their doors while a few remain open despite having very few customers passing through.

Sadly, international travel will likely be one of the last aspects of everyday life to return to normal as governments struggle with the challenge of releasing their economies from lockdown. Governments fear that once flights resume, returning ex-pats and international visitors will cause a second wave of deadly infections, a worrying trend which is already occurring in China.

Where does this leave duty free? It’s no exaggeration to say that retailers will probably go under unless they are included in aviation industry relief packages and can have their rent payments reduced or temporarily suspended. Travel retail has been able to bounce back quickly after previous crises such as 9/11, the SARS outbreak of 2002/3 and the financial crash of 2008, but the scale and impact of the current coronavirus is much more profound than these events.

With the travel retail sector market temporarily on hold, whisky distilleries have seen a crucial sales channel cut off. Scotch whisky accounts for over a third of all duty free spirit sales and duty free is one of the most important export markets for single malt whisky producers. Large and even medium-sized drinks companies have whole divisions dedicated to duty free and travel retail, but it’s likely these will be reduced or disbanded if the crisis drags on much longer.

Of course, the worry for the wider travel industry is that passenger numbers may take years to recover to pre-pandemic levels, due to the widely predicted global recession waiting in the shadows, as well as fears over catching the virus and less business travel due to more e-networking.

As the lockdown continues across much of the world, duty free retailers have unsold stock to find a home for, and some are finding imaginative ways to keep trading.

For instance, Brisbane Airport Corporation has launched a new online trading platform called BNE Marketplace to allow its duty free shops to continue trading despite the airport being closed.

Meanwhile in Asia, DFS Group, Singapore Changi airport’s long-serving liquor and tobacco retailer, is celebrating the end of its 35-year tenure at the airport this June with a two-month promotional campaign at its website. The retailer is offering free home deliveries to customers in Singapore spending over S$250 (£140), 200 newly added products, and up to 50% discount on selected brands.

The solid single malt offer includes Glenfiddich Grand Cru at S$310 (£174).Also look out for Glenmorangie Rare Cask 1399 at S$348.60 (£196).

In summary, I suspect travel retail has a long road to recovery once COVID-19 subsides. It is going to have adapt fast to a new trading landscape.

Travellers aren’t going to want to spend ages in cramped, congested stores and wait ages in long queues to pay. Home delivery services and till-less payment systems are going to play a big part in the duty free shop of the future if it is to have any hope of survival.

Royal Salute

25 Years Old Treasured Blend

Here’s a release from Royal Salute from last year, which in the usual flurry of releases from the TFWA World Exhibition,
I failed to cover before.

Royal Salute 25 Years Old Treasured Blend is a permanent addition to the Royal Salute collection which went on shelves in selected airports last November. The new blend contains some rare casks from the Royal Salute vaults. The Treasured Blend is described as having ‘a decadent sweetness’ with ‘hints of spices and notes of stewed fruit, treacle, toffee and dark chocolate’. The whisky comes in a stunning gift box designed by fine artist Kristjana Williams, which depicts the various animals of the Royal Menagerie which were once housed in the Tower of London when the double doors of the box are opened. Royal Salute Treasured Blend 25 Years Old has a recommended retail price of $260 (£208).


1965 Washback Edition

This collector’s item from Islay’s Bowmore was part of the cancelled DFS Masters of Wines & Spirits event in Singapore earlier this year. This rare whisky, limited to just two bottles, still went on sale at DFS Group’s Terminal 3 departure store
from March, priced at S$60,000 (£33,728).

The 52-year-old whisky is full of the distillery’s signature rich fruit and restrained smoke style. On the nose, there is fragrant fruit, beeswax and dark chocolate, while the palate offers burnt heather, jasmine and dried fruit. The finish is both fruity and floral.

The whisky comes in a stunning cabinet designed by master craftsman John Galvin using authentic Oregon pine from Bowmore distillery’s No.1 washback, inlaid with Sterling silver tree rings to reflect the age of the whisky.

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