Sales of over $2 billion, footfall of 89 million, staffing 6,000 people, sales-per-head of $41, media value of $1.3 billion, AED80 million worth of charity spend… and so many more millions, dollars, dirhams and units kept coming up in my conversation with Colm Mcloughlin, Executive Vice Chairman and CEO of Dubai Duty Free that I had to ask him, “How do you store all these numbers in your head?”
“I just make them up,” he joked.
79-year-old Colm Mcloughlin is a legendary name in Dubai’s business landscape credited for the many successes of Dubai Duty Free and its subsidiaries. The witty and exceptionally intelligent CEO, who was one of a team of ten from Aer Rianta given the responsibility of setting up the Dubai Duty Free back in 1983, joined the industry 53 years back at Shannon Airport in Ireland, the birthplace of the industry.
Duty Free: The Origin Story
Duty-free shopping was the brainchild of Irish businessman, Brendan O’Regan, who worked for the then struggling Shannon Airport in the 1940s. Mind you, this was the time when World War 2 had just ended, which means the economy wasn’t massively stable just yet, but people had resumed international travel. Shannon Airport, being one of the stop-over locations, saw an uptick in footfall, and Brendan noticed that while on layover, people liked to shop.
“Brendan O’Regan got the idea of starting a retail business within the airport and got permissions from the government to do it on a duty-free basis,” said Colm.
How did he get around to doing this? Well, he had noticed that on cruise ships, no one had to pay taxes on purchases, as it was considered international waters. All he had to do was get the Irish government to declare Shannon Airport as ‘not part of Ireland’, and voila! Just like that, the duty-free business was launched in 1947.
“Initially, the store started by selling luxury goods concentrated on selling Irish products. The travellers coming at that time indicated what they wanted – perfumes, luxury clothing, liquor, tobacco etc. – and the government gave approval for it to be sold to travellers without any tax being charged,” he explained.
“At the time, Shannon Airport employed 10,000 people and did business worth $10,000. As of 2019, the duty-free business around the world stood at $76 billion. In the 1940s, Shannon was just a region but because of the developments it emerged into a small town with 3000-4000 people living there,” he added.
While Brendan was successful in bringing this concept to Shannon Airport, he hadn’t imagined then that this could turn out to be a global business model, given that he couldn’t go to every government in the world and convince them to allow duty-free sales. However, having heard about the successes at Shannon Airport’s duty-free shops, many airport officials from around the world flew down to see the business and learn about its nuances – a group of whom were from Dubai. Following initial discussions, the government of Dubai did a contract with the government of Ireland to bring a team from the Shannon Airport to set up the Duty Free in Dubai.
“There were shops at the Dubai airport back then run by traders from the city. After the agreement, the team came from Ireland in 1983 on a 6-month contact to set it up. I was a part of that team as I was the manager of the Duty Free shop at the Shannon Airport. During the six months, the Director General of Civil Aviation, Mohi-Din BinHendi, asked me if I would stay and run the business in Dubai and I agreed to come. In 1983 I came on a 2-year contract and now I’m in year 39,” he smiled.
In its very first year, Dubai Duty Free recorded sales of $20 million, amounting to an average passenger spend of $5 per person. Within two years of its existence, it won the Airport Duty Free Operator of the Year Award in Nice, France. Soon enough, having realised the value of marketing to the world, Dubai Duty Free launched the “Fly Buy Dubai’ advertising campaign promoting its status as the best duty-free shop in the world.
On New Year’s Day of 1987, Dubai Duty Free opened its first Arrivals shops, opening its doors to a new set of customers and adding an additional revenue arm to the business, which was at this point recording an annual turnover of $53 million already, with daily sales topping AED 1 million for the first time in October 1987. But that was just the beginning of its colossal expansion plan.
In the 1990s, Dubai started riding the Middle East’s oil boom and positioning itself as a tourist destination and shopping haven. Unsurprisingly, Dubai Duty Free grew proportionately too, in terms of demand, sales, and scale of operations. In 1997, it opened its new head office and warehouse complex adjacent to Terminal 1 covering over 12,000 square metres. In the 1990s, it opened an outlet in Terminal 2, broke its own revenue records multiple times, launched its private label, and opened several new dedicated outlets within the airport.
Retailtainment: Diversifying Outward and Beyond
What also happened in the 1990s was a realization of why it was important for Dubai Duty Free to connect with its customers beyond the airport and further the brand engagement with the people in the city by means of sporting events, F&B, and extravagant promotions like the Millennium Millionaire.
“Out of Dubai Duty Free, there have been many projects that have come to be – the Tennis Stadium and tournaments, restaurants like the Century Village and Irish Village (which also had a strong presence at Expo 2020 Dubai) and the Jumeirah Creekside Hotel,” said Colm.
Today, retailers all over the world have realised that age-old metrics like sales-per-square-feet and revenue generation isn’t solely responsible for quantifying the success of the business. While Colm keeps a keen eye on those numbers and does get excited to see his sales-per-head increase from $41 to $47, he also understands that his customers need to engage with the DDF brand, beyond just the products. Shoppers are looking for brands that reflect their individual lifestyle, values and experiences. “Retailtainment has been a conscious decision and it is part and parcel of our marketing policy. We have a calendar and we change it with specific promotions to various places,” he said.
For DDF, which is by default constricted within the walls of the airport, it is even more important to have a strong presence outside to enhance brand recognition and create a stronger connection.
“The media value that our tennis generated for Dubai last year was $1.3 billion. We always knew that marketing was very important for Dubai Duty Free and we budget 2.5% of our topline income on marketing projects. The Desert Classic Golf tournament is another one of our marketing initiatives. We have been involved in sponsoring horse races such as Dubai Race Day and the Irish Derby. Something that also grew out of Dubai Duty Free is the DDF Foundation and since we started we have supported about 80 different charities and spent AED80 million,” he added.
DDF has hosted a range of iconic events over the course of its 39 year history including the historic Helipad Open between tennis champions Roger Federer and Andre Agassi atop Burj Al Arab.
Rise, fall, and rise again!
Come the new millennium, Dubai Duty Free continued on its trajectory towards making a bold mark in the regional and global retail landscape, starting with an additional 5,400 square metres retail space at the Sheikh Rashid Terminal at Dubai international Airport, and another 8,000 square meters outlet in Terminal 3. By 2011, Dubai Duty Free had retained its status as the largest single airport retailer in terms of turnover three times in a row and that performance did not falter until the end of the decade.
“In 2019, Dubai Duty Free was the single largest duty-free operation in the whole world. We had business of $2 billion that year, employed 6000 people and were being copied all over the world,” he states proudly.
However, when the novel coronavirus hit the world causing absolute havoc to life and business, aviation, tourism, and retail were affected most. Needless to say, this meant trouble for Dubai Duty Free. From 89 million passengers in 2019, the number came down to almost 26 million in 2020, sales revenue was hit drastically, and nearly 3,500 employees had to be let go.
However, Colm took Covid-19 as an invaluable learning experience and used the opportunity to make changes and create more avenues to add value to the overall business. “During Covid-19, we learnt about spacing the passenger, demonstration of goods, and curating displays within the area focussing on specific festivals and events,” he said. “We learn all the time and we forget as well, and learn again.”
Among the key additions to the business during the pandemic were home deliveries and click-and-collect. “We did $47 million in sales in that category. Our online business only started during the pandemic,” he added.
Dubai Duty Free’s online business is a robust revenue arm today, doing 400 to 500 orders a day with 40 trucks operating under DDF’s home deliveries services. Just like when a customer shops at the Dubai Duty Free at the airport, there are no duty charges on purchases, just VAT that will be added to the bill.
Speaking of Value Added Tax, when Colm was asked whether an increase in VAT rates in the future would be a concern for him, he was quick to say – No. VAT would only affect the Arrivals duty-free shops, which accounts for just 10% of the business at this point. “VAT would be a small concern in Arrivals Duty Free because if people buy tobacco in arrivals, they do pay VAT. Departure is 90% of our business and we are happy to boast that it is duty/tax/excise free,” he explained.
More is More
As the retail industry is quickly recovering from the devastations of the pandemic, so is the Duty Free business, and Colm uses numbers (of course) to make the point.
“We are currently 92% better than last year and have budgeted AED5.1 billion for this year but we think we will finish this year with AED6 billion sales. In 2 years’ time we will be back up to our 2019 performance. The traffic through the airport last year was 28 million people and this year it is being budgeted at 47 million, but looks like it is going to be 58 million people. This year, our sales are up 95% compared to last year and that’s because our traffic is up and our sales-per-head is up.” he said. “I’m also happy to say that we are back at 4000 staff from 2500. And we won’t hire anyone new until we call back all the staff (that were let go during the pandemic).”
Colm is also very proud of the fact that DDF hasn’t recruited any new senior managers in over two decades, as the retailer believes in upskilling and promotions of the existing staff. “We haven’t recruited a senior person from outside in 22 years. We have 6 senior management people – our dream team – and three of them are ladies. Half our staff are ladies and they have equal opportunities to men,” he said.
With optimistic expectations of sales expected to cross the $1 billion mark this year fueled by the increasing passenger numbers, recent addition of dedicated boutiques such as those for Louis Vuitton, Cartier, Bally, and plans to have a strong presence in the new Al Makhtoum International airport, Colm has got a busy second half of the year slated already.
For years, perfumes and cosmetics have been DDF’s biggest category, followed by alcohol and tobacco, gold, and electronics.
“We recently opened a new area for Louis Vuitton products and another for Cartier products. During the last month, our jewellery accounted for 60% of the sales in Cartier. We have Christian Dior and Chanel boutiques as well,” he said. “Our big plan in the Al Makhtoum International airport that reopened in May is to have a Duty Free shop there. Eventually that airport will have five runways and a capacity for 148 million people and we plan on having 80,000sqm of duty-free space there all of which will be run by us.”
Over the years, Dubai Duty Free has won many awards and been recognised all over the world for the groundbreaking strides it has made in travel retail. Colm Mcloughlin too has won many accolades for all he has done to take the DDF brand forward and make it a global example, but again, he attributes his achievements to his company. “For the 15th year in a row, Dubai Duty Free has won the award for the best duty-free shop in the world. Colm Mcloughlin was given an honorary doctorate by the Middlesex University and I know full well that was because of the DDF,” he concluded.
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