| Kippreport.com

Adding Value to Retail Market

June 29, 2012 8:02 by kippreport

 

How do you define your business?

We are an international shop­ping destination at the luxury end of the market, attracting customers from all over the world. We are different from a mall in that we are a fully out­door outlet-shopping village with 80 to 140 stores. We own and operate the vil­lage and rent the stores to the brands. So while the business model is similar to a mall, the experience is different.

How do you incentivize third-party people to drive traffic?

Historically, we haven’t provided incentives. Now we are moving towards increasing partnerships with those third parties by providing products that they can sell to their customers. And those packages and products are commission­able to third parties.

Could you tell us a little more about your representative offices?

We have representative offices in 12 markets around the world. Until the end of 2011 we had six, so we have doubled in 2012. New offices include those in the U.S., Mexico, Korea and Turkey. We focused on core markets where we already had significant amounts of business. In the Middle East we have moved from a big focus on the UAE to the whole region. Our representatives here visit Kuwait, Saudi Arabia, Qatar and Bahrain.

How was 2011 for you?

The past year was extremely good. We hit EUR1.5 billion in sales, which was a growth of approximately 15 percent. This is incredible considering the eco­nomic situation in Europe and the fact

We focused on core markets where we already had significant amounts of business. In the Middle East we have moved from a big focus on the UAE to the whole region. Our representatives here visit Kuwait, Saudi Arabia, Qatar and Bahrain.

How was 2011 for you?

The past year was extremely good. We hit EUR1.5 billion in sales, which was a growth of approximately 15 percent. This is incredible considering the eco­nomic situation in Europe and the fact that all of our villages are there. Even the average spending per consumer visit went up slightly – about five percent. We had more people coming to the vil­lage – about 30 million visitors in the last year. A lot of that comes from our tour­ism efforts worldwide because the growth of the non-European markets last year was around 57 percent – way above local growth. Further, we saw growth of 57 percent to 58 percent in the first quarter of 2012. About 70 percent of our base is tourism – but a lot of that could be classified as regional. About 30 percent to 35 percent is international, al­though it’s difficult to tell. We track our figures through companies that process tax refunds. But these don’t take into account customers who didn’t file the refund for whatever reason. From sales figures, we can deduce that 10 mil­lion of our customers are international. However, the average spend of the international customer is significantly higher than the regional customer.

Considering EUR500 million of your business is international, how much comes from the Middle East?

The Middle East is our second-largest market after China and accounts for about 12-13% of our sales. This also tells you how large China is for us. By the end of the year, China will account for 20 percent to 25 percent of our sales and could be even higher.

In terms of sales, Kuwait is number one, followed by Saudi Arabia and Qatar.

What kind of products do GCC cus­tomers tend to prefer?

They are very much focused on accesso­ries – handbags, shoes, male fashion. I go to Bicester Village in the UK pretty regu­larly and always see a lot of Arabic men shopping in groups.

 

Do you plan to build any new villages?

Not in Europe, but we do have plans for China. Towards the end of next year we are planning to open our first village just outside Shanghai. That, I believe, will be one of a collection of villages in the country.

The expansion plans in Europe are about increasing quality of the stores and the brands and also adding addi­tional phases. In Paris, we are adding a new phase, which will add another 30 boutiques. In Brazil we are moving from Sao Paolo and Rio de Janeiro to secondary cities.

Could you tell us a little more about your partnership with Etihad Airways?

We joined the Etihad Guest program – which is their frequent flyer program. For every EUR1 or £1 members spend at the villages, they will earn two Etihad Guest miles. For us it’s a very effective way to target very high-end, regular, international travelers – not only from the GCC, but from Europe and Asia as well. And, most importantly, they were very open to working with us because shopping is an important activity of many of their members.

Any other airline partnerships?

We have other partnerships, not in the GCC though. We want to keep some level of unique offering per market. Our partners in Europe include Luf­thansa, Air France and KLM, and we’ve just about signed a deal with Virgin Atlantic. In Latin America, we are working with the Brazilian airline TAM and we are looking to work with a couple of major airlines from China and Southeast Asia.

 

Any challenges to doing business in the Middle East?

During the first two years, the chal­lenge was that we didn’t have an actual product to offer to trade partners. But it is interesting for this year because we have packages from which the partners can earn commission. Now they are in­centivized. There’s probably less chal­lenges for us in doing business here because shopping is such a core part of day-to-day life. In Europe, particularly in the travel industry, shopping is not so important. In the beginning, the biggest challenge was knowing who we were because we don’t operate a village here. So we employed messaging to get the correct information out.

What are your expectations for 2012?

Globally, we are looking for 15 per cent to 20 percent growth in sales over last year. I think we would be disappointed if it wasn’t 50 percent to 60 percent growth from the Middle East. The first quarter of 2012 was 84 percent up on this time last year from the Middle East, so we are optimistic. As the number of flights increase, it gets easier to reach Europe. The one challenge could be that Ramadan falls in the middle of the summer this year. But so was the case last year, and people still came.