If Your Business Is Having a Bad Year, Remember Airport Fashion Retailers Exist
Hello and welcome to the 34th issue of moderated, a newsletter created to dive into insights and phenomenons of the Fashion Industry. It also has a curation and summary of the most talked about last week’s events of the industry, offering further readings for more details.
If you are new here, welcome! I hope I can somehow help you to keep up with the fast-paced Fashion Industry.
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This week, moderated will be about the impact that the travel restrictions imposed by the pandemic had on airport retailing and how the fashion industry can deal with this issue.
But before jumping into the main article, check the last week’s recap of the Fashion Industry.
Last Week’s Recap
UPS Turned Down Packages from Large Retailers Due to Overwhelming Demand
The after Thanksgiving shopping peak in the US put UPS in a delicate situation. The delivery company had to stop accepting new packages from large retailers such as GAP, Macy’s, and Nike. According to the Wall Street Journal, the company could not keep up with the unusual demand, since people turned to online shopping to avoid agglomerations at stores, which resulted in large retailers left with an issue of product delivery. Remember when I wrote a whole article saying this would happen? If not, check it here and start buying your Christmas gifts right now.
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Moncler to Buy Rival Brand Stone Island
The Italian maker of luxury puffer jackets Moncler has agreed to buy Stone Island in a deal that values the smaller rival at €1.15 billion. The acquisition will be made in two steps. At the first stage, Moncler will buy 70% of the company that owns streetwear label Stone Island from chief executive Carlo Rivetti and his family. At the second step, the Italian label will purchase the remaining 30% from the Singaporean state-backed investor Temasek. The first stage is being done in a cash-and-share deal, in which the Rivetti family will receive 50% of the payment in shares. Temasek has the opportunity to get the same deal or sell its part fully in cash. Stone Island is a popular brand with celebrities such as rapper Drake and former Oasis lead singer Liam Gallagher.
Click here for more details about the deal.
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Vaccines’ Announcements Boosted Luxury Results
The announcement of four potential Covid-19 vaccines that could bring this whole retail nightmare to an end generated some instant optimism in the luxury sector. The impact can be seen on the Savigny Luxury Index (SLI), which tracks the stock prices of 19 publicly traded luxury companies.
The SLI went up almost 16% in November, after the vaccines' announcements. This was the largest monthly gain of the SLI since October 2011. However, specialist alarm for caution, since many major shopping destinations will probably be in and out of lockdown over the next few months, including during the Christmas shopping season. Travel retail will also still take quite a while to come back to significant levels. Therefore, it will still take some time for the SLI to be stable as it may continue to go through some short-term volatility.
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Zalando Co-CEO to Step Down to Prioritize Wife’s Professional Ambitions
Rubin Ritter has been the co-CEO of thriving online fashion company Zalando since 2010. During this time, he helped to build Zalando into the largest online-only fashion retailer in Europe. Last week, he announced he would be leaving his position to prioritise his wife’s professional ambitions and growing family. With his exit, Robert Gentz and David Schneider will remain as the company’s co-CEOs.
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Keeping Track of Covid-19 Financial Crisis Impact - UK Is in Trouble
Bonmarché, a fashion brand that targets women over 50 and employs 1,500 people, files for its second bankruptcy in 2020.
Ted Baker cuts 953 jobs after negative results throughout the year, and a no-deal Brexit can worsen the British brand’s situation.
The brick-and-mortar-only Primark estimates a £430 million loss in sales due to lockdown measures during the autumn.
Rating La Mode - Ugly Design
This week I am recommending an Instagram account sent by a friend that curates designs that are so bad that become good. The name of the profile is Ugly Design, which is very self-explanatory since its content consists of posts of ugly design pieces. Why follow this? Well, it’s hilarious and sometimes someone’s bad idea can give you a good one because inspiration comes from everywhere. By the way, the images I used in this section are the chill ones, I sware it gets worse - or should I say better.
Check Ugly Design here to have some fun and see how far people’s creativity can go.
If Your Business Is Having a Bad Year,
Remember Airport Fashion Retailers Exist
When coming to Brazil to visit my family, I went to the terminal where the largest flights of the Paris-Orly Airport leave for the first time since this Covid-19 mess started. Needless to say that I have never seen it so empty before. To complement the few people walking around the quiet airport, all stores, with the exception of some touristy shops, were close. Chanel, Gucci, Saint Laurent, and Celine were just a few stores that I saw completely shut down due to lack of clientele. Of course after seeing that I had to check how tragic airport retail data is this year and I decided to share what I found here.
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The Importance of Airport Retail
Airport retail moves around US$79 billion in a normal year and airports and fashion brands rely on this stream of revenue to generate profit. In 2019, the world’s top 10 Airports registered US$12.6 billion in sales. For the fashion industry, sales made at airports are extremely important, especially when it comes to cosmetics and perfumes. However, bags and scarves also get a share of sales from this sector.
Since the first duty-free shop opened in 1947 at Shannon Airport in Ireland, this business sector became a key tool not only to turn profits from but for brands to market themselves to different customers. Some brands even made airport stores their strategy to access a new range of customers, such as Brazilian jewellery label H. Stern. Before the pandemic, global airport sales were forecasted to grow 6% in 2020…but we all know that’s not how the story goes.
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Airport Retail During Corona Times
In 2020, the Covid-19 pandemic changed our never as before connected world with travel restrictions to contain the virus contagion. The result? 2020 is set to close with a drop from 60% to 80% in travelling. If people are not travelling, they are not going to airports and if they are not going to airports, they are not shopping at airports’ stores. Now the numbers are rough. On average, airport shops have lost between 75% and 85% of their turnover, according to David Dayan, CEO of Beauté Luxe, which is the global leader of perfume and cosmetics distribution in airports and border shops. Dayan also stated airport retail will probably take five to ten years to go back to the revenues of 2019.
According to a scenario modelling by McKinsey and Oxford Economics, the pandemic lifecycle of the travel industry will consist of four stages: a crisis period, a recovery from the pandemic, a recovery from the economic downturn, and eventually a new normal.
The problem is that many retailers can’t afford to wait for all that to happen. Waiting can mean losing jobs and closing stores. Therefore, many retailers are creating new solutions to solve this problem.
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Solving the Issue
Initially, the recovery will be around domestic or nearby -country travel. In China, the numbers of domestic flights already went back to the pre-pandemic level, which is a good sign. However, it is important to keep in mind that part of these travellers comes from the suppressed demand for international travelling that is not currently possible. This scenario means that the airport retail that is usually concentrated in large airports at regional hubs or shopping capitals may spread to medium airports at regions that were less attractive for this sector before the pandemic. This shift can be already seen in China, with brands already investing in opening stores at regional hubs airports. Another result of this scenario in China was the Hong Kong-based DFS Group 22% stake acquisition in Shenzhen Duty Free Ecommerce Co.
Some brands are also exploring the click&collect strategy, in which clients buy products online and collect them once at the airport, avoiding taxes. This doesn’t solve the problem, but it can drive a few sales, and let’s be honest, any sales are welcomed at this point. However, most stores at airports are not even open to offer this service, once paying staff and bills to stay open is not worth it at this moment. However, this path can have some potential. In India, Google partnered with startup Airbuy’s Spot platform to create a micro-app in which customers will be able to order food and beverage in six different airports in the country. Even though the companies are starting with food, they have plans to expand soon to other retail sectors, as Jasjit Makol, one of Airbuy’s founders, explained:
“The Google-Airbuy will, in the next 12 months, also get into other partnerships to enable online shopping retail outlets in domestic terminals and duty-free outlets in international terminals.”
Even though this strategy is not the solution to all airport retail’s problems, it can be a way to recover from this tragic year. Besides that, I believe retailers and airports will have to patient and cheer for vaccination to be done fast around the world. Travelling may be one of the last industries to recover from 2020 and the fashion industry depends on trips to cash in. Having the virus gone will only be the first phase of recovery. To travel, people need financial stability, which the economic crisis ahead of us may not be able to provide. I guess I have to make sure I buy the Havaianas flip flops for my friends in Paris before I get to the airport because there is a big chance that stores won’t be open there.
Thanks for reading this week’s moderated and next Tuesday I will be back with more.
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