Fly buy

As the sponsor behind some of the world’s most high profile sporting events, Dubai Duty Free is not your average airport retailer. But then, as Diana Milne finds out, neither is its Managing Director Colm McLoughlin.

“We think by the end of this year we'll have surpassed last year's sales and we are forecasting that by the end of this year we'll be up four or five percent on 2008. And we're very happy with that”
-Colm McLoughlin

When Colm McLoughlin arrived in Dubai from Ireland in 1983 to set up the country's first Duty Free outlet, he planned to stay for six months. But, like for some many expatriates, things didn't quite go to plan and 26 years on he still hasn't returned home. "I still haven't finished what I started, because I'm quite slow," he jokes. "It was only ever supposed to be a six month project but I'm still here." He fondly remembers the early days of setting up shop in a Dubai that bears little resemblance to the glittering metropolis of today: "At the time there were only three million passengers passing through the airport each year. We were traveling around in taxis with no air conditioning and in those days there was no Emirates Airline, no Emaar or Nakheel, and the tallest building in the emirate was the Dubai World Trade Centre. We hadn't a clue what we were going to do. I remember conducting the first training session for staff in an open tunnel under the airport and using a plank of wood stretched across two tar barrels as a table."

Today DFF is the world's biggest Duty Free operation in the world in terms of annual sales and employs 3,500 people. In its first year of business in 1984 it achieved sales of US$20 million. In 2008, its 25th year, sales reached US£1.1 billion dollars. McLoughlin says his proudest achievement however, is the fact that over half of his original 100 staff are still amongst the now 3,500 strong workforce: "We still have 56 of the original people working for us and we're very proud of that," says McLoughlin. "In fact a lot of the people that originally came here on one or two year contracts are still here and many are now preparing for retirement. We call them our pioneers."

Success story

He believes there are several factors that have contributed to the success of DDF - and that led it to rocket to number one position among the world's Duty Free outlets last year, despite having lagged at number three for two years previously: "We had been trailing at number three for a couple of years but last year we had a very good year and were found to be top in the world. The main reason we are the best is because of what we call penetration. In a lot of airports the retailers sell to about 16 or 17 percent of departing passengers. In Dubai we sell to 42 percent. International traffic through Dubai Airport is ranked at about 11th or 12th in the world so it followed that our Duty Free would be ranked in that position. But because we sell to more people and we sell a little bit more to all of them we're actually punching above our weight and we have come out as number one." He goes on to say that he believes the success of DDF can also be attributed to the fact that it is well positioned in the airport, it offers good value for money and it has "the best trained group of staff in the Duty Free industry."

Of the product it offers, he claims the best sellers are those in the perfumes and cosmetics category, which account for 17 percent of its business. Gold makes up 13 to 14 percent of sales while cigarettes and alcohol account for 10 to 11 percent. Meanwhile electronic goods make up around seven percent. "It then drifts down to products that make up one percent of our total sales but of course one percent is still $10 million," McLoughlin goes on to say, adding that one of the product categories where he sees the greatest potential is confectionary.

Although already a highly successful retail operation, the DDF's sales were boosted last year by the opening of Dubai International Airport's Terminal 3 building, which features 4,800 square metres of retail space and has capacity for 43 million passengers. "We have found the Terminal 3 building to be highly beneficial because it eased some of the congestion we had in the existing terminal building. This has meant we can handle passengers quicker and it has played an important part in our success this year. There are many airports around the world where the Duty Free Sales are down 15 or 20 percent this year but in our case we're holding level with last year and we are told that in this business that is very good." He admits however, that despite the advantages of a swish new terminal complex, DFF has not been entirely immune from the effects of the economic downturn. He says sales were down seven percent on last year's figures in the first four months of this year and that there has been an increase in budget airline passengers who tend to spend less in Duty Free. However, he claims that due to a series of promotions and discounts, sales are now level with last year's figures: "We think by the end of this year we'll have surpassed last year's sales and we are forecasting now that by the end of this year we'll be up four or five percent on 2008. And we're very happy with that."

Brand visibility

DDF's success story is down also to its marketing strategy, which sees it sponsor high profile sporting events both at home and abroad. In Dubai it sponsors the Rugby Sevens, Dubai Airshow,  Dubai Duty Free Golf World Cup, International Film Festival, Dubai Tennis Championships, Dubai Desert Classic and Dubai World Cup horse racing event. Meanwhile overseas it has sponsored the Irish Derby and the Shergar Cup at Ascot. This strategy gives it a global visibility that money spent on conventional forms of advertising cannot buy, according to McLoughlin: "I think this gives us exposure in lots of parts of the world. We think it is the sort of promotional activity that is difficult to buy anywhere. For instance we have run the Dubai Tennis Championships for 16 or 17 years. Our marketing gurus tell us the amount of publicity that generates was valued last year at US$1.35 million. That would be how much we'd have to spend to buy that sort of advertising. So it achieves two things. It keeps our name going and it keeps promoting our name. And of course the more it does that, the more it keeps promoting the airport."

This close relationship between the fortunes of Dubai Duty Free and that of Dubai Airport and the state owned Emirates Airlines is due to the fact that all three are owned by the Dubai Government and under the leadership of HH Sheikh Ahmed Bin Saeed Al Maktoum. This says McLoughlin, means all three organisations are mutually supportive and work together to ensure each benefits from the other's success. It also means DDF has a far more active role in the life of the emirates and in the lives of its residents, outside the context of the airport than other duty free operations would have: "One big advantage is that out Duty Free at the airport is home owned," says McLoughlin. "It's owned by the government. I'm the boss of it and Sheikh Ahmed is my Chairman so we're all kicking with the same foot. In most airports around the world, the commercial space is rented out to commercial Duty Free operators and they do not have the same drive to do the things that we do. They would not, for instance, sponsor the Irish Derby or the Dubai World Cup or build the tennis stadium. A rented operation wouldn't be in a position to do any of that stuff so it's very beneficial to us. They would not step outside their marked zone and get involved in local activities like we do." He goes on to say that those activities include, not only corporate sponsorship but also charitable funding through the setting up of the Dubai Duty Free Foundation to which a percentage of its profits is transferred every year to support local and international charities.
According to McLoughlin the nature of DDF's ownership means he also has a close working relationship with Sheikh Ahmed : "We have a one to one relationship. I report to him and he helps me out when I need his support."

McLoughlin and his team may have achieved great things since the early days operating with a skeleton staff in a relatively small provincial airport. But there is much more to come for DDF with the opening of the new Dubai World Central airport due in mid 2010. The scale of the airport, which is under construction in the Jebel Ali area and will have capacity for 70 million passengers, is immense and DDF has already earmarked 4000 square metres of retail space within the Duty Free shopping complex. Describing the scale of the project, McLoughlin says: "It will be the biggest airport in the world. There will be five parallel runways, which will be spaced far enough apart for four or five aircraft to be taking off or landing at the same time. Although we have arrangements for 4000 square metres of retail space to open there, eventually the blue print is for 54,000 square metres of retail space. Our retail space within the existing airport is 15,000 square metres, so it's big." It's the next chapter in what has been one of Dubai greatest retail success stories. And it looks as though McLoughlin won't be going home any time soon.

Dubai Duty Free: the vital statistics
Dubai Duty Free, which celebrated its 25th Anniversary on 20th December 2008, has seen its business grow from Dhs70 million (US$20 million) in 1984 to Dhs3.9 billion (US$1.1 billion) in 2008. On its anniversary day the operation achieved over Dhs70 million (US$20 million) in sales during the 24-hour period, which equals the annual sales of its first full year of business.

Dubai Duty Free announced annual sales of Dhs3.95 billion (US$1.1 billion) in 2008, representing a 23 per cent increase on the previous year. December itself was a record month with sales reaching a new monthly high of Dhs403 million (US$111 million), while on 17th December, the milestone figure of US$1 billion (Dhs3.6 billion) was crossed.

Last year saw the operation doubling its retail space from 7,000 square metres to 15,000 square metres with the inauguration of the new Emirates Terminal 3 in October 2008. The opening of Dubai Duty Free's Head Office and Distribution Centre and the increase in the operation's staffing levels to 3,700 were also major milestones for Dubai Duty Free in 2008.

Award winning
To date, Dubai Duty Free has received more than 150 awards from industry, media and government bodies. It is a five time winner of the Frontier Award for 'Airport Retailer of the Year', and has recently won Global Traveller Award for 'Best Duty Free Shops' in 2008 and 2009, the Business Traveller UK and the Business Traveller Middle East award for 'Best Duty Free Shopping', along with the Raven Fox Award for 'Middle East Travel Retailer of the Year'.