Brisbane Airport Corporation has struck a new ten-year duty free contract with Lotte Duty Free, which begins on 1 February 2024. Lotte Duty Free is the airport’s existing duty free partner, having begun operations at Brisbane’s International Terminal in March 2019. The agreement follows what the airport company called “a fiercely competitive tender for the ten-year partnership”.
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Over the next decade there will be a major terminal redevelopment and doubling of the duty free footprint in the run-up to the 2032 Brisbane Olympic and Paralympic Games.
Brisbane Airport CEO Gert-Jan de Graaff said: “Lotte Duty Free is clearly aligned to our values of Communication, Care, Courage and Collaboration, and to our sustainability focus, with sustainable design elements included throughout the future store design and a focus on waste management.
“This alignment, coupled with an incredibly exciting store concept showcasing the future of duty free retail, makes them a great partner for Brisbane Airport over the exciting decade ahead as the world comes to visit.”
Brisbane Airport executive general manager of Commercial Martin Ryan said: “We were incredibly impressed with the calibre of responses we received to our Duty Free Request for Proposals (RFP), with the operators clearly as excited as we are about the growth and possibilities at Brisbane Airport.
“The key criteria we looked at as part of the process was around four pillars – evolving, welcoming, sustainable and place. Lotte Duty Free not only expertly addressed this criteria, but also impressed in the areas of innovation, new brands, experiential retail and creating a space which is ‘Uniquely Brisbane’. We’re very excited to see what our teams can deliver together over the life of the partnership.”
The ten-year partnership will trade through three distinct phases, seeing the current 2,795-square-metre footprint across arrivals and departures expand to a 3,900-square-metre departures store, 1,056-square-metre arrivals store, ‘Last Chance’ store and 38-square-metre atrium retail area.
The major expansion of the departures footprint will be completed by 2026, said Ryan.
The expanded footprint will enable Lotte Duty Free to employ an additional 35 percent staff members across the terminal, with the company also leveraging expertise at its Korean headquarters to promote and drive tourism to Brisbane and Queensland.
Lotte Duty Free CEO Kim Ju Nam said: “The award of a new ten-year term at Brisbane Airport will be a stepping stone for Lotte Duty Free to be Oceania’s number one duty free operator. As a global travel retailer, Lotte Duty Free will continue to pioneer new markets with active investment.”
Lotte Travel Retail Oceania CEO Steve Timms added: “Our renewed partnership with BAC will create a truly amazing retail experience worthy of Brisbane’s future as an Olympic City. We thank the BAC for entrusting Lotte Duty Free to bring world-best concepts to Brisbane Airport.”
The transformation of the Brisbane International Terminal is part of the AUD5 billion Brisbane Airport is investing in Future BNE.
The programme, which includes over 150 projects, is the biggest in Brisbane Airport’s history. Future BNE will upgrade both the Domestic and International Terminals and continue the development of a new Terminal 3 Precinct as Brisbane and the State of Queensland look forward to hosting the 2032 Summer Olympics.
As part of the wider redevelopment, an RFP will be released in early 2024, calling for partners across speciality retail, food & beverage, news and books and foreign exchange.
INTERVIEW
Addressing the thinking behind reappointing Lotte Duty Free, and balancing qualitative and financial proposals in the bid process, Brisbane Airport executive general manager of Commercial Martin Ryan said: “We were very firm from the outset that this wasn’t about financials at the cost of everything else. We were looking for the market to bring us what the future of duty free would look like. It was much more around the concept and the belief in the concept and the alignment with our vision.
“Brisbane is very much focused on the partnerships that we create over time and particularly for this concession leading into the Brisbane Olympics and Paralympics in 2032. We want to make sure we were partnering with the best partner we could and then also making sure that we are creating the best store experience for consumers and passengers through the terminal over that time. The financial offer was reflective of all of those things that we could create together.”
Ryan added that of the short-listed potential partners, most were “very close” on the key financial elements. “In the end Lotte Duty Free’s bid outstripped the market. But it wasn’t any clear difference in financials that determined the winner.”
Ryan also elaborated on the importance of Brisbane Airport’s four pillars – evolving, welcoming, sustainable and place – that guided the process and thinking for the new concession.
Under ‘evolving’, he noted: “We don’t want these stores to be perfect on day one and progressively get worse over a ten-year concession. We want to ensure that we continue to evolve and invest in the offers and continue to make the market relevant as things change.
“Evolution will be important also as the first couple of years, before the departures store is completed by 2026, will see a lot of movement of locations.”
Sustainable means not just financial sustainability or green sustainability, he added. “We want the concepts to be sustainable for a maximum period of time so we’re not wasting elements of our joint investments. Of course, we want a high focus on ESG and that’s not just the building materials, it’s the way we approach the product and the ranging, plus the role of our people.”
Under the ‘welcoming’ pillar, it will be critical to ensure that the expanded walk-through store does not present barriers but encourages engagement, and is welcoming to all travellers. Finally, ‘place’ hinges on being what the airport calls ‘Uniquely Brisbane’, reflecting the city and region and the broader terminal development plans over the decade ahead.
On how Lotte Duty Free will deliver on those pillars, Lotte Travel Retail Oceania CEO Steve Timms said: “We have the benefit of our experience at Brisbane and we know the customer well. That has given us a deep insight into how we can reimagine the duty free experience at Brisbane.
“We have tried to look into the future at how technology will evolve, not just linked to what is available today but over that period of time. Our strategy is one of evolution through the term. And in fact, our history has been one of evolution here at Brisbane as well. And that has been one of the keys to our success here to date.”
On developing Sense of Place further at the airport, Timms said that Brisbane brings with it different challenges to other Australian cities. “It’s not about representing architectural icons as you might do in Sydney or Melbourne, it’s about the feel and vibe of the city. So you have to spend time, along with the designers, understanding how people like to hang out, or to be engaged here. We built Brisbane from the ground up and it is like nothing we have done elsewhere.”
That flavour of Brisbane will be expressed through a series of eight pavilions or engagement concepts, each with its own design treatment.
The idea, added Timms, is to maximise engagement with the traveller. “Each of these areas will have its own story telling and set of experiences, whether that is through Australian craft spirits or our malt whisky experience for international brands that we believe will be another popular feature.
“We’ll position these strategically throughout, from a distillery experience to fine whisky to a partnership with Diageo and Bundaberg in a bespoke concept. In beauty we’ll do similar, with brands able to bring their very best experiences.”
Ryan said: “For every core category in duty free, we wanted to ensure a level of experience so that customers can come early to the store and spend time, versus just picking product off the shelf. The fine-tuning of design and of the concepts is under way.”
Lotte Duty Free said it will also premiumise to take Brisbane Airport’s offer to a new level, and appropriately for the shopper base.
Timms said: “Brisbane Airport is a little way off having the range of luxury boutiques you might see elsewhere, but areas such as watches & jewellery are an opportunity. We will have a first-in-Australia luxury watch concept. That premiumisation will evolve over the life of the concession across all categories and we have made a financial commitment to that evolution through the ten-year time frame.”
On how the customer will see the store environment and offer chime with that vision, Ryan said: “We want a regular traveller to go through the terminal and see something different every time. That is display and promotions at one level, and we’ll be flexible to create newness and refit the store over time to react to other consumer changes. Digital will be a big part in doing that, allowing us to be flexible.”
The new space also offers big opportunity compared to 1,800sq m in departures today.
“We are planning for the journey right the way through,” said Timms. “Under our capex commitment, we’ll reinvest significantly in year six to make that significant adjustment to the needs of the business, especially with 2032 in mind.”
All of that extra space signifies opportunity for brand partners too, and many have expressed excitement about what might be possible in joint discussions with airport and retailer, according to Ryan.
“We have asked brands to tell us how they would represent their brand in the best possible way. We will hold ourselves all accountable to the performance of the square meterage, but we have asked what they could do and create in that area that they have always wanted to do? That has been exciting.”
Timms added: “We are challenging the brands. We want to know what we can do differently to engage, though being first, through exclusives, through limited editions, plus in fit-outs and through our people.”
Within the categories, spirits and beauty are the traditional leaders at Brisbane Airport, and will be represented accordingly. The added space will allow for new offers in sunglasses, technology and food & confectionery, which are under-spaced currently, says Timms.
Immediate priorities are laying out of the arrivals store plus a last-minute store that will also come in 2024, and adding new technology.
Ecommerce is another investment, of which Brisbane Airport’s head of commercial marketing Lauren Graham said: “We have had some success launching BNE Duty Free with Lotte quite recently with click & collect central to that. It’s part of our omnichannel approach that connects with people parking and then engages with them through their journey. We’ll be working with Lotte Duty Free to align duty free with our whole customer experience platform, and to enhance in it with further investment.”
On the consumer audience coming through, some things have changed since Covid, but the main shopper in duty free remains the trans-Tasman traveller. Timms said: “We have separate strategies by nationality, with different selling teams where appropriate.
“The biggest segment is Australia to New Zealand where we aim to maximise sales with the generous New Zealand liquor allowances. For the Chinese customer we’ll aim to engage before they reach the store in many cases through our social networks.”
“There is plenty of room for everyone,” said Ryan. “We are probably among the most multi-focused airports as we have such a range of nationalities and we are not reliant on one.”
On the expectations for improvement in average spend and overall sales, Ryan would not be drawn on specific numbers, but said: “We see increases over time. We have a responsibility to deliver on our forecast growth over the coming years. And we’ll do our part to help the specialist, the duty free retailer, with the conversion part of that equation, in any way we can.
“Brisbane as a city is also an exciting place to be. There is prosperity and enthusiasm in and around the city for business and we are confident that growth will continue as well.”
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Asked for a final message to the industry about what the new contract will say about Brisbane Airport and its future, Ryan said: “We believe in the prosperity of the city and that was confirmed by the participation in our tender process. There will be opportunities from traffic growth, with further tenders about speciality and F&B in early 2024 – and a new terminal in the ten-year horizon.”
Timms added: “We are seeing real raising of the game with our partners in terms of technology and engagement – and that is engagement in terms of experience and in terms of people. All of our suppliers are very aware what we are looking for, they are very much onboard as we as we develop these new stores, and it is becoming evident, as it will to the consumer, just what an exciting place Brisbane Airport will be in the future.”
(Source: The Moodie Davitt Report)