Lagardère TR sheds light on how to combat structural decline in the industry

During a keynote address earlier this year, Dag Inge Rasmussen, Chairman & CEO at Lagardère Travel Retail, noted the greatest concern the industry faces is the risk of decline in spend per passenger across the core duty free categories. He cited the restructuring of the retailer’s travel essentials brand RELAY as an example of how Lagardère Travel Retail is focused on delivering what the consuming traveler really wants: more options and greater convenience, and drew a comparison between the restructuring and duty free.

“We have to question whether we are always offering the right product, in the right place, at the right price. Just as we did with RELAY, we need to review our product mix and ensure it is still relevant to travelers,” Rasmussen tells GTR Magazine in a follow up interview. “In our view, locally sourced goods across all product categories will play an especially vital role in the future of the duty free sector.”

The recent transformation of RELAY demonstrates how heritage brands can evolve to remain relevant in a fast-changing travel environment. While the brand had been historically reliant on the core categories of books, press and tobacco, by diversifying and reinforcing the product mix to include convenience, snacking and portable tech, RELAY turned a shining light on local items and souvenirs. In doing so, Lagardère Travel Retail helped to give fresh dynamism to RELAY's main offer and responded more effectively to the needs of the modern traveler. The RELAY concept is now fit for growth, and it is believed the duty free channel needs to transform similarly with the help of more relevant product ranges, more easily navigable stores and welcoming, locally inspired environments.

Embracing local culture

On ways to avoid structural decline and reinvent the duty free offer, Rasmussen says, adaptability, agility and local relevance are key. “In all our stores, we should aim to create differentiated, culturally rich experiences that enhance core categories with freshness and diversity. Success lies in offering immersive, dynamic and flexible store formats, and will require close collaboration with airports to trial innovative concepts,” he explains. Rasmussen goes on to say, in some areas, hybrid locations may be suitable. For instance, where duty free and snacking or dining combine in a seamless, easily navigable space.

The retailer defines locally sourced products as a powerful lever of differentiation, traveler engagement and commercial performance. Its target of having 30% local products in its duty free shops responds directly to the traveler’s growing appetite for authenticity and uniqueness. “It also reflects our belief that embracing local culture makes commercial sense,” he states. “In Lima, this strategy is brought to life in our extensive local offer in duty free, and also through our food hall, Nación Sazón, which celebrates Peruvian cuisine and identity. “By empowering our local teams to design bespoke offers, we drive growth while responding to travelers’ demand for something different.”

It is apparent whatever concepts Lagardère Travel Retail deploys, the retailer relies heavily on “a genuine spirit of partnership” between operator and landlord. Rasmussen refers to Lima as an excellent example of what can be achieved when such a partnership exists.

The move toward a profit-sharing model

The opening of the new terminal at Lima Jorge Chavez Airport is a milestone for Lagardère Travel Retail in Latin America. With 4,000 square meters of retail and 3,300 square meters of dining, the initiative reflects the retailer’s ambition in the region. “We are conscious that we remain a challenger in Latin America, but that mentality helps drive our determination to set new standards in travel retail and dining, and to create value for current and future partners,” says Rasmussen. “Lima showcases our ability to deliver flagship operations in partnership with local stakeholders, while reinforcing our commitment to adaptability, local empowerment and trust. It also demonstrates our capacity to meet the high expectations of airports and travelers, and gives us confidence in our ability to succeed elsewhere in the region.”

In the case of Lima Airport, Lagardère Travel Retail moved away from the traditional concession model toward a profit-sharing model, which allows both landlord and operator to invest in and optimize the business together. “If we want to be creative in the way we get travelers to enter our shops, then we have to be creative in the way we structure our business model,” explains Rasmussen. Built on trust, a successful profit-sharing model requires transparency and a close alignment of objectives. According to Rasmussen, this structure supports innovation, enables responsiveness to market volatility and fosters a stronger partnership. The one in play at Lima Airport has already yielded tangible results. “While not universally applicable, it is a valuable option, especially at a time of uncertainty and unpredictability,” he says.

Traveler confidence

Rasmussen maintains that Lagardère Travel Retail remains a challenger in Latin America; the retailer continues to study the region to see where it can bring value. Preserving confidence in this industry is a key factor of success. When it comes to how the retailer is contributing to the regaining of traveler confidence, Lagardère Travel Retail is committed to ensuring the duty free price promise. “We need travelers that are confident in the future, in the economy,” he shares. On this front, the retailer also takes active steps to support local communities through inclusive hiring and by investing in teams that reflect the regions it serves.