India, China will power travel retail trade: Anirban Chowdhury, Nuance India

 

Anirban Chowdhury, Country Head, Nuance India

The retail revolution in the country may have hit policy roadblocks, but travel retail is one segment that has bucked the trend. In the last half-decade, travel retail business in the country has grown at 25-30% per annum.

The commissioning of many new airports and rise in the operation of low-cost airlines are key factors that have contributed to the growth of the travel retail, says Anirban Chowdhury, country head of Nuance India.

The sector is likely to see a similar growth in the current year too, says Chowdhury. Zurich-based Nuance, a leading player in the travel retail industry operating 370 outlets across 58 airports in 19 countries, has formed a joint venture with Shoppers Stop to operate the duty-free shop at Bangalore International Airport. He sees the Indian travel retail sector posting an exponential growth in the coming years.

Chowdhury, who has over a decade of experience in consumer business, retail marketing and retail operations, is of the view that India and China will power growth of world travel retail trade in the near future.

The growth of travel retail in the country is closely linked to the commissioning of new international airports by the private sector. The efforts to increase non-aeronautical revenues by airports in the private sector to 50% or more of the total revenue have contributed substantially to its growth.

However, compared to private sector airports, revenue from travel retail is 25-30% of the total revenue in airports in the government sector.

"There has also been a huge increase in the number of inbound and outbound travellers through major airports in the country. The introduction of low-cost airlines to new destinations has added to air traffic, in turn, benefiting the travel retail sector," he says.

The world travel retail industry is estimated at around $40 billion. Not only is the turnover expected to double in the next decade but bulk of this growth is likely to come from the Asian region.

In India, Delhi and Mumbai are at the forefront of travel retail business, followed by Bangalore and Kochi. In fact, Cochin International Airport was among the first in the country to focus on non-aeronautical revenue by promoting travel retail business. Today, Cochin duty-free's turnover is close to 100 crore.

"Earlier, Indians spent money mainly at overseas airports. However, now they prefer spending it at Indian airports as overseas purchase invariably leads to excess baggage and breakage. Another reason for higher spend at the domestic duty-free shops could be that the new privatised airports offer better passenger facilities and larger retail space.

The range of products that these shops offer is at par with leading airports around the world. There are instances of duty-free shops in India offering products at lower prices than the overseas ones. Cigarette is one such product that is cheaper in Indian duty-free shops compared to other airports like London," he says.

Traditionally, product groups that have dominated the travel retail segment are liquor, tobacco, cosmetics and confectionaries.

The pattern holds good for the Indian industry too, except for the fact that cosmetics have not shown growth similar to the growth of other product groups. The lower share of women travellers was the reason for the poor performance in this product category till now.

However, Chowdhury says the trend is changing as the share of women travellers is gradually on the rise. Apart from traditional items, the Indian travel retail sector has started promoting new product categories such as electronics.

The Bangalore airport duty-free shop has, for example, started promoting LCD TVs in a big way by offering local warrantee and free installation facilities. The new offer came after those manning the duty-free shop at Bangalore International Airport noticed passengers bringing TVs from Singapore or Bangkok.

Nuance joint venture has now tied up with Sony to introduce the product at Bangalore duty-free at prices that are comparable with overseas prices.

Chowdhury says the potential for Indian travel retail business is huge now, with new terminals coming up in Chennai and Mumbai. Facilities are also being upgraded at the Kolkata airport.

The new international passenger terminal at Kochi is expected to be ready by 2014. Goa and Kozhikode airports too offer immense scope for growth.

Traditionally, the revenue between arrival and departure is in the ratio of 80:20 in India. However, in the case of new airports such as the one at Bangalore, revenue between arrivals and departures is more balanced, with the ratio moving closer to 50:50.

Business would boom further if some policy issues are addressed. For instance, "products made in India cannot be sold at arrival duty-free counters. Sales to foreign passport-holders would increase if these counters are allowed to stock Indian goods," he says. 

Source : http://economictimes.indiatimes.com/opinion/comments-analysis/india-china-will-power-travel-retail-trade-anirban-chowdhury-nuance-india/articleshow/14011512.cms?curpg=1