Colm McLoughlin, Executive Vice-Chairman, Dubai Duty Free: Interview

Interview: Colm McLoughlin

With 1m sq metres of new mall space set to be added to Dubai in the coming years, how will existing retail developments be affected?

COLM MCLOUGHLIN: This can only benefit the sector, as the supply of retail space is increasing in line with rising demand. Indeed, the most recent studies estimate that retail sales will jump to $151bn by 2015, a 7.85% uptick on the $140bn witnessed in 2011.

The surge in tourist numbers is also a key factor. Dubai Mall alone registered 75m visitors in 2013, which marks a year-on-year increase of 15%, with a significant portion of this being attributed to tourists. The Dubai Shopping Festival, meanwhile, saw participation from 70 malls, with 6000 retail outlets offering promotions. According Dubai Economic Council statistics, the retail sector accounts for 13% of total GDP, which is equal in value to the finance, real estate and construction sectors. Dubai is also the fastest-growing city for US retail and food brands. Additionally, Expo 2020 will cement Dubai’s position as one of the most iconic cities for retail.

How is the Dubai market working to diversify its retail offerings in order to distinguish itself and capitalise on new opportunities?

MCLOUGHLIN: Customers are becoming more sophisticated and businesses need to respond in sync. Data analytics are evolving to allow businesses to pinpoint target demographics and cater to their needs with precision. In response to the growing number of Chinese tourists, for example, we now have 570 Chinese staff on hand, dual signage in English and Mandarin, and have targeted promotions and special products concentrating on relevant themes such as Chinese New Year. We are also seeing new sources for inbound tourists such as a large Chinese corporate event that awarded 16,000 employees with a five-day holiday to Dubai. In preparation, we placed Mandarin signs in airport duty-free and offered a 10% discount to those paying with China UnionPay. We aim to take similar localisation measures for Indian and African customers.

What are the most important global trends taking shape in the duty-free industry?

MCLOUGHLIN: While we are sure to see strong, consistent growth within the duty-free industry, there are certainly future challenges to overcome. Competition between low-cost carriers is putting downward pressure on airfares, opening the possibility that airlines will increase restrictions on hand baggage. In addition, various countries are imposing new quotas, such as Australia and Singapore’s reduction of their tobacco allowances, or India’s new rules restricting the amount of gold per passenger upon entry.

In 2013 global duty free and travel retail sales reached a record $60bn, a 7.5% increase over the previous year. Airport duty free sales accounted for $34.67bn of that business, with the remainder coming from ferries, border shops and airlines. In the Middle East, the value of airport-based duty free sales reached $3.9bn, representing a 10% increase over the previous year. In terms of revenue, Dubai Duty Free was the highest grossing in the world in 2013.

In what ways can logistical improvements and infrastructure upgrades help to create new and boost existing retail opportunities?

MCLOUGHLIN: E-commerce is a growing trend in the duty-free industry and we are currently introducing an online service to enhance the overall customer experience. Furthermore, the automation of warehousing has helped to improve the industry, making a significant difference to our operations. Our distribution centre is currently 95% automated, which is reflected in greater efficiencies across the business. Dubai World Central will also contribute to the expansion of retail space for the city. To that end, by 2020 Al Maktoum International Airport will grow to have a total of 40,000 sq metres of retail space.