70 years of achievement in duty free and travel retail
7 min read
19 July 2017
It has been 70 years since the launch of the duty free and travel retail industry. Here is an overview of the industry and its origins.
This year marks a huge milestone for duty free and travel retail – the 70th anniversary of the industry. The wonderful concept of duty free shopping began in 1947, when the first airport duty free shop opened at Shannon Airport, Ireland.
However, the roots of this fascinating and thriving business go even deeper. It’s origins could arguably be said to be to the diplomatic supply business. This was founded on the principal that embassy buildings were foreign territory and therefore diplomats that worked in them were entitled to allowances of tax free goods. Or it might also be said that duty free supplies to the military several centuries ago, which when they were on foreign campaigns, were exempt from tax as it made little sense to pay for armed forces and then tax them, were where it all began.
The reason that the three main staples of duty free and travel retail are alcohol, tobacco and perfume can also be traced back to an era long before jet travel. Journey times were long, and so the need to take alcohol or tobacco on a trip to relieve boredom or discomfort was understandable. Similarly, personal hygiene requirements in the crowded space of a small ship or horse-drawn coach were probably the origin of today’s allowances for perfume. But even when duty free sales started to become more formal, the progress from “sustenance” towards the idea of “personal export” was a slow one.
How times have changed since then. In the past 70 years, the duty free and travel retail industry has seen phenomenal evolution and development. Today’s travel retail experience is dramatically different, and for many, a highlight of any journey.
Also notable is the spectacular growth that has been enjoyed since those early years. Recently valued at a substantial US$63.5bn by research specialist Generation, the duty free and travel retail industry is forecasted to grow to US$120 billion by 2025, making it a significant economic force.
Travel, the foundation upon which it’s success depends, is increasing, particularly amongst millennials, with the global figures of air passenger traffic forecasted to rise from 7.1 billion in 2017 to 9.5 billion in 2020. This all bodes well for the future of the business.
However, it doesn’t mean that the future is without challenges. Social and economic instability limit people’s willingness and ability to travel. Low footfall and penetration in the stores also remain an issue, as airport retailers need to work to get passengers to stop at their stores on their way to the gate and turn the browser into the buyer. But president of the trade association TFWA (Tax Free World Association) Erik Juul-Mortensen is upbeat about the industry’s prospects. “Throughout our 70 year history, the industry has adapted to change and challenge, and it will continue to do so in the years and decades to come.”
Advances in technology have transformed the world in which consumers operate. In what feels like just a very few years, technological devices have developed from toys for the tech-savvy few to necessities for all. As on the high street, duty free and travel retail has faced competition from the internet and mobile technology. Juul-Mortensen says that whether at airports, on cruise ships or outside Europe at international border crossings, duty free and travel retail is in many ways no different to high street retail. “It too needs to embrace new ways of communicating and creating relationships with customers. The future of our industry, like so many others, is undoubtedly digital.”
Research commissioned by TFWA into the use of technology within the industry shows that 88 per cent of all passengers travel with a smartphone. Passengers are becoming younger, and the large number of millennial travellers now dominating the market make it increasingly more important for retailers in duty free and travel retail hoping to build a meaningful dialogue with customers to find new ways to engage with consumers via digital platforms.
In response to the need for a stronger bond between the travel retail and technology industries, TFWA has created a new event in the form of the TFWA DIGITAL VILLAGE, an exhibition to showcase creative digital solutions to run alongside its week-long, global gathering, the TFWA World Exhibition & Conference held annually in Cannes in the south of France.
The TFWA DIGITAL VILLAGE event will take place between 4th to 6th October and will give brands the opportunity to see what the very best technology companies have to offer. The exhibition will also give the technology sector the chance to showcase its offers to a significant retail industry with some big names exhibiting at the event. Exhibitors already confirmed include advertising company JCDecaux who will showcase their connected screens and interactive terminals, and global airport app FLIO. THE PERFUMIST, which provides in-store solutions, CRM and loyalty programmes, robotics and in-store analytics and global e-commerce platform OLLDU are also among an impressive line-up of technology-forward companies.
The main TFWA World Exhibition & Conference in Cannes this year will also shine a spotlight on technology, with keynote speaker David Rowan editor-at-large at award-winning technology and trends magazine Wired UK. Rowan, an acknowledged expert on the powerful influence of technology on businesses and everyday life, will be looking at the duty free and travel retail industry from the viewpoint of a tech start-up and analysing how advances in technology will transform traveller behaviour.
Juul-Mortensen says he is confident that this new event will do much to help equip the industry for an exciting new era as it turns the next page of its history. “This platform is a milestone, highlighting how far the industry has come in its 70th year, and paving the way for success in the next seven decades.”