the other source.
Super Bowl 34 coming January 30th to ABC.
Next on 7news, new information tonight about the Columbine videotapes including a controversial
phone call and emergency surgery for comedian David Letterman.
This is 7news at 10.
It was a dramatic rush hour.
Police chased through downtown Denver and only AirTracker 7 showed you the controversial
ending.
Tonight, four Denver police officers face disciplinary action over the chase.
Good evening.
I'm Anne Trujillo.
And I'm Bertha Linnen for Mitch Tonight.
Thank you for joining us.
Tonight, Denver police chief Tom Sanchez says four of his officers stepped over the line
when arresting two drug suspects at the end of that chase.
In tonight's Veruja File, John has the exclusive pictures and what the officers are facing
for their improper conduct.
As the two suspects wound their way along sidewalks and down one-way streets, AirTracker
7 was above documenting the chase live on 7news.
Police were careful throughout trying to protect civilians who might inadvertently get in the
way of the two accused drug dealers.
But at the end of the chase, when the two seemed to give up, police clearly made some
serious mistakes.
A special prosecutor ruled that this conduct was not criminal.
But many who saw it live on 7news and many who have seen it since, including the mayor
and the police chief, were disturbed by what were clear violations of police procedure.
Today, Chief Tom Sanchez said four of these officers were guilty of such violations in
three specific areas, using excessive force, careless use of a firearm, and violating procedures
involving officer safety.
Sanchez has recommended all four for disciplinary action and clearly hopes that this will quell
the controversy following the live broadcast of what some in the community thought was
a clear case of police brutality.
The four officers involved could now face written reprimands or they could be suspended.
I'm John Veruja, 7news.
And tonight, police chief Sanchez has passed his findings on to the manager of safety.
A final decision on the officer's status is pending.
We have new information tonight about the controversial Columbine videotapes.
7news has learned that the Jefferson County Sheriff's Department made an angry phone call
to a Time magazine reporter, angry over the magazine article that revealed what was on
those videotapes.
And tonight we have a phone call recorded in December of last year between Jeffco undersheriff
John Dunaway and the reporter Tim Roach.
Well, I mean, the whole freaking world thinks that I took something off the record and used
it, and that's not me, John.
Well, Tim, we were very explicit about the use and reference to the videotapes.
You assured me that you would make no reference to them for the reasons that I outlined to
you, the concern.
And what has happened with it is we've got the entire media world blitzing us here and
saying, what in the heck are you doing?
You've given this stuff to the Time.
Why didn't you give it to us, et cetera, et cetera, et cetera?
And, you know, it's caused a huge stir with those victims' families.
They've called up saying, what in hell have you done?
Why have you done this?
They're, like, ready to rip our throats out over the whole thing.
Oh, my God.
I mean, this is...
I mean, I wanted to have...
The sheriff's department recorded the phone conversation without Time magazine's knowledge.
Time says that it stands by its article and that its reporters did not violate their agreement.
New information tonight about a deadly plane crash in Jefferson County.
It happened shortly after 1 this afternoon as the plane was doing a flyby at the Jefferson
County Airport.
That's where 7News anchor Sean McLaughlin joins us with the latest.
Sean?
Sean, two new bits of information tonight.
First, investigators tell me the pilot was the only person on board the plane and, therefore,
the only fatality.
Second, they say the pilot was doing barrel rolls with the plane just before it crashed.
By nightfall, investigators had shed a little light on the events leading up to the deadly
crash here at the Jefferson County Airport.
The pilot of the PC-7 single-engine plane was doing a low-level flyby, including some
aerobatic maneuvers.
It was two right barrel rolls followed by a left barrel roll.
The airplane became vertical and came down forward, impacting on the right wing.
The plane went down, burst into flames, and scattered debris across the tarmac.
The pilot died in the crash.
Eyewitnesses confirm the plane appeared to be doing some sort of maneuvers before impact.
I saw him go down as if he was going to land and start right back up and did a full roll
and got about seven-eighths of the way through the roll and went right back down.
And he either tried to get out of here in a hurry or make a loop.
Well, he decided on the loop, I guess, but he was too low for a loop.
There was a quick flash of fire and then a huge puff of smoke.
I couldn't believe it.
I just stood there in shock.
The PC-7 is a rare Swiss-made two-seater turboprop used for high-performance military training,
and investigators don't know much about it.
It is now up to them to determine if the crash was a result of some sort of plane malfunction
or pilot error.
The identity of the victim has not yet been released, and this investigation will likely
take months as they take that wreckage apart and try to determine exactly what happened
out here.
Ann?
Ann, Sean, so what are investigators saying about the pilot?
Well, they aren't saying much.
They don't even know what country he is from.
Now, I did talk to an eyewitness out here who was monitoring the tower traffic between
the tower and the plane at the time.
They said the pilot of the plane appeared to be speaking with a thick European accent,
so it is a possibility that the victim of this crash was not a citizen of this country.
We'll have to wait and get that information confirmed through sources, though.
Okay.
Thank you, Sean.
Most other local schools do it, so now Denver Public Schools may try the same approach,
that is starting classes in August rather than in September.
Seven News reporter Hendrick Sobrandi has that story.
That's genuine.
... that we cover in this overview.
We've interviewed some of the industry's top names, manufacturers and retailers, to
ask them exactly what they're hoping for from the region.
We also discussed some of the problems which are evolving in the region as the market opens
and matures, issues which are beginning to challenge some of the previously rosy views
on the region, issues which have become regular pitfalls of the international luxury goods
market such as currency movements, discounting and distribution control.
Now for the last decade, suppliers have been talking about the market in Asia Pacific with
great excitement.
People were traveling more, incomes were rising, economies were strong or strengthening, and
duty-free in most places, particularly Japan, offered huge price reductions.
Now further down the line in the wake of the Japanese economic bubble bursting, the subsequent
weakening of the yen and more recently other Asian currencies, and also the realization
that Asian travelers were no longer buying indiscriminately whatever product featured
the most prestigious label, we asked some of our suppliers whether Asia held the same
excitement for the industry.
The suppliers we spoke to were perhaps predictably more optimistic than some of the retailers.
More and more passengers, more and more outlets, more and more products, very lively competition
all over the region.
So for the future years, definitely there's a big potential to tackle here.
Oh yes, very much so.
Now there have been one or two issues, the value of the Japanese yen and some reduction
in travel short term from Japan, currency issues in Southeast Asia.
You could go along that sort of road of thinking, but quite honestly these are temporary blips.
The region on any analysis has the greatest potential of any in the world.
Already there's a tremendous number of consumers, but better than that we've got a lot of people
who don't even buy our products now, and with the economic growth rates which have always
remained high, and they're going to be coming into our marketplace.
So there's a great growth opportunity, great growth opportunity for cosmetics, and maybe
even a greater one in the longer term for fragrances, which is still relatively low
in consumption, but should increase at a greater rate.
Duty free sales in Asia now represent an impressive 40% of Dior's global business and around 20%
for Arden.
According to Peter Midwood, this figure is expected to increase to over 30% in five years.
The retailers, however, presented a more cautious view.
Well, I think a lot has to do with the overestimation of the growth of the Asian countries in the
late 80s.
Japan has definitely slowed down, its economy has just recovered.
South Korea was never able to be the next Japan as it was originally expected in the
late 80s.
And also within the Southeast Asian region, Singapore, Hong Kong, China, and Malaysia,
it also wasn't able to meet its early expectations to be the economic power it should have, or
it should be.
I think most of the industries in this region is very labor intensive, so it doesn't really
contribute to the growth of the respective countries.
I think it's trailed off a bit, Peter.
We're still covering off the body products phenomenon, and that led to very much above
average growth, which is leading to some difficulties right now.
In Asia, there's also been some anomalies in distribution systems, which certainly has
affected our business somewhat.
Essentially, there's very limited growth right now.
We're still on the positive side, but we're certainly not getting the sorts of growth
rates that we were used to in the last two years.
In Japan, the situation is much the same.
Although, of course, the retailers in its main international airports in Kansai and
Tokyo are operating under unique conditions.
Saki Asaki was one of the pioneers of fragrance and cosmetic sales in Japanese Duty Free,
establishing the first standalone fragrance and cosmetic store Blanc de Blanc in Asaka's
first and former international airport.
Along with his fellow Japanese operators, Asaki has benefited enormously from the sales
growth in fragrances and cosmetics in Japanese Duty Free over the last 10 years.
But in 1996, the retailers transferred to a new site at the new Kansai International
Airport, where seven retailers operate 10 stores, all selling largely the same products.
It's a scenario that no one is happy with, and competition is intense.
This, plus a recent decline in the value of the Japanese yen and import deregulation,
have put pressure on cosmetics, which was as recently as two years ago, the only category
for these retailers to be showing substantial sales increases.
Asaki Well, I think our sales is now stable.
When we opened the former international airport, we enjoyed so much the sales of fragrances
and cosmetics.
Saki But now you moved to Kansai in 1994, what's
the status now?
Asaki Well, after we opened the door for the Duty Free at Kansai International Airport,
it's very difficult.
The airport itself is very nice, user-friendly, and easy access.
Very beautiful airport.
We love it, but very costly, and also very competitive for Duty Free business.
We also asked Eva Horan of Nuance Australia whether the high expectations that many suppliers
have of the region are realistic.
Eva Horan Maybe not totally realistic.
We have quite a few problems in this area ourselves.
We've had a tough time over recent months.
Sales have not been particularly buoyant.
I suppose it's if you're... Are we looking in comparison or in isolation?
Because if you're looking at Europe, you have the problems coming up with the 1999 situation,
in addition to that you've got the proliferation of discounting and the movement in the marketplace
there.
From that point of view, certainly we don't have quite the same depth of problems here.
However, we do have... Discounting has started in a very small way, but we do have some discounters
here.
In Japan, you've got the deregulation of the market that's going to come up, that's
going to affect our sales.
So opportunity, yes, whether it's major, I think is probably more realistic to look
at as an opportunity without focusing on it too much.
Emma Horan Well, this is an interesting picture that
raises the question, is Asia Pacific still the great panacea that everyone was hoping
for?
Travel has increased and is still increasing at great rates.
More importantly, for this sector of the market, more women are traveling.
And yet, we have these cautious signs that suggest that perhaps the market may take a
dip before it starts to surge again in the way that everyone was hoping for.
Let's take a close look at those issues which are adversely affecting the Asia Pacific
market to try and assess just how far they're mudding the picture for suppliers.
We began by asking suppliers what their main concerns were in the region.
Richard Lange I think that the two main concerns that
I see today as far as Asia is concerned is the general overheating in terms of the economies
in the area and in terms of the fierce competition.
When I talk about overheating economy, we have just seen in the last few months what
has happened.
The Japanese yen has been very weak.
It has had tremendous negative implications for our business from Australia to Singapore
to Taiwan.
The second point is the currency situation which we have just been through with the ringgit
in Malaysia, with the Singapore dollar, with the Taipei, the Philippine peso has simply
dropped 20 to 30 percent.
And obviously, that is a volatility that the business will be affected by.
But if I really have to cut all that away and go further into it, I think one of the
most serious elements in the Asian economy today is that because of the overheating,
the price of real estate has become so high that it is extremely difficult for retailers
to make a business and therefore ultimately us.
Like we have very high airport concession fees which in my view is very detrimental
to our duty-free business.
We see now in the domestic markets of Singapore, of Hong Kong, of Taiwan that people simply
have to close down because there is no business with the high, whether it's concession fees
or rents, it is really a big risk.
A lot of my colleagues sort of have some worries about the political stability in certain countries
in this part of the world.
I don't rank that as a very, very high risk.
Asia will always be a little volatile like any emerging market, but I don't see the
political risk very high.
We asked him then how far import deregulation in Japan was affecting his business there.
Has it opened the floodgates to paralleling and therefore discounting as was feared?
Really not yet, but I happened to participate in a discussion at the tax-free symposium
in Singapore a couple of years ago and I said we have in the cosmetics industry to learn
what happened in the liquor industry and of course the same thing can happen if we are
not aware.
And as I always say, it is up to ourselves to control that it doesn't become a problem
and certainly it isn't yet in Japan.
It can be if brands are not willing to manage their global pricing, to manage the risk of
parallel, obviously then there is a great risk that we will face the same issue as the
liquor did.
We put the same question to Dior.
Probably we can say that so far it's not as dramatic as we could expect.
Let's say one or two years ago when we talked about the deregulation in Japan, today probably
the biggest concern we have is not the deregulation in Japan, it's the currency variations we
have in this region.
Many issues aside, surely the major issue is the fact that remains that these consumers
now because of the pricing factors are now being driven into the arms of the parallelism
discounters.
Yes, that's correct.
We have this threat and this is a threat upon us.
But we have two ways to fight against this phenomenon.
The number one is to decrease the availability of the product in those non-authorised distribution
and as far as Dior is concerned, we took very, very major steps to really fight against this
phenomenon.
We started looking at some results and I'm sure when discussing with the operators that
now everybody can view some progress in that.
Now we are not making promise, we are talking about facts.
The other way to really fight against this phenomenon is to have new product, to reinforce
innovation.
And since the beginning of this year, we didn't launch very key products, but the second semester
of this year, 1997, will be a flood of new products coming into the market and this is
a real weapon we have to fight against this phenomenon.
Japanese retailers too are lamenting the once golden age when prices and duty free represented
unbeatable value.
So now very easy to import cosmetics and fragrances.
So lots of products through the parallel importers to the discount shops and mail orders warehouse.
So the difference of domestic market and duty free in between their coming and possibly
lower of the duty free shop.
It's a very, very uphill struggle for us.
So is duty free still the cheapest place for Japanese travellers to buy their fragrances
and cosmetics?
Well I think not the cheapest now compared to, of course the domestic market department
stores price.
It's very competitive, but discount shop, some are lower than duty free shop.
But duty free shop has always the products very nice and confident, so easy to buy in
a short time.
But the fact remains that the price differentiation between the domestic market and duty free is
still a good one at 30%.
Peter Midwood is certainly not over concerned about the narrowing price differentiation
between the domestic and duty free prices.
The price premium for Japan has declined pretty much continually.
I remember when I first joined this business was about 60 to 70% for our products.
This is about 18 months ago.
It's more in the order of 35% now.
It's a natural progression.
I would think it would stay at around the level it's at now, but I don't think it's
practical to go back up to the sort of 60% or probably even double the normal retail
if you like, or US retail type price in the past that's been seen in the region.
It's probably reached an equilibrium.
Well clearly the situation now in Japan is very different from five years ago when price
savings in duty free were far higher.
And if import deregulation has not yet affected sales as much as people initially feared,
clearly it's a situation that everyone is monitoring, particularly if domestic discounting
starts to take its toll.
Distribution control and currency fluctuations are clearly the main issues affecting the
market.
Currency movements are simply one of the hazards of international trade, but distribution is
another matter.
Unless distribution is properly policed, the cosmetics and fragrances duty free market
in Asia will suffer the same fate as the liquor market.
In other words, duty free outlets will be priced out of the market by aggressive price
competition from local market discount stores.
The extent of domestic discounting of liquor in Asia has all but wiped out duty free liquor
sales in certain parts of Asia.
Could the same thing happen in fragrances and cosmetics?
Well I think to be honest, it has already happened in Hong Kong already.
I'm sure a lot of people in the industry will know Sasa, which is a major player in the
parallel market.
They have gone from a moment pop shop five years ago, and now they're being listed in
the Hong Kong Stock Exchange.
And they have about 10 to 15 branches all around Hong Kong.
And I think it's going to be a major, major impact to the industry.
So we can see where they're affecting department stores and even the duty free stores operating
the airports.
I mean are they affecting your sales too?
I think it has.
Because the reason why I'm saying this is because I see Japanese travelers or Taiwanese
travelers, they actually have shopping guides, which actually tell them to buy the discounted
fragrances and cosmetics in Sasa.
So it seems that they are already making a very big impact to the industry already.
Now naturally it is affecting our sales, definitely.
It's affecting the sales of every brand.
As for us, we did have much more trouble in this particular aspect of the market because
of the parallel sales.
But now due to the steps we took to really combat that, discounting is less and less
important to our brand.
It's less and less hammering our brand.
But still in the future, if you look at the difference in prices you have between France
and Japan, for instance, or between France and the US, you can see that there is a trend,
which is a natural trend in the market, to get all these prices closer to each other.
So I mean this will be a way to really calm down the big fever of discounting.
First, attack the green market, and second, harmonise our retail prices all over the world.
For DFS, the problem is certainly there.
But Jim Hurley maintains that it's up to the retailer to provide the sort of environment
that is irresistible to the customer.
Now we have to ask the question, Jim.
What effect has Sasa and organisations like Angel had on Japanese demand in your stores?
Well, it's less Japanese than with some of the other Asian nationalities, such as the
Taiwanese Peter, but it has had an effect.
But our response to that, in addition to working with the suppliers involved, is to give the
customer a comprehensive service.
In our view, the value that we give the customer in terms of a guaranteed in-stock position,
100% customer service, money-back guarantee, are attributes that are worth paying something
for.
And that's still the majority customer.
But how do you combat the fact that these self-same passengers are walking around with
guides that direct them to these shops?
Well, you can only do it by providing a better overall package for the customer.
We have had complaints from time to time, and we do worry about it.
And we certainly don't want to come across as dismissing this as a non-issue.
But competing on a price basis is not a strategy that DFS believes in.
We believe in a comprehensive service, as we always have for our customers, and we'll
continue to pursue that.
Nuance, on the other hand, is not yet experiencing any serious competition from domestic discounting.
Nonetheless, the company is watching the situation closely.
It's not a serious problem at this point, but we're not putting our heads in the sand.
We're obviously aware of it, and we'll look at it as the need arises.
But at this point, it's not a major problem.
Do the retailers feel, then, that the suppliers are doing enough to control distribution?
I've taken the word that they are actually doing enough.
But if you look at Sasa and the variety of items they offer, and even some of the point-of-sales
materials they have in their stores, it's very hard to argue that the suppliers are
actually doing enough.
I'm sure for the regular customers, this just looks like a regular cosmetic store to them.
I think it varies by manufacturer.
Some are very, very diligent, and they do what they can, and with considerable degree
of success, and they invest a lot of money doing it.
Others are not so diligent, and our view is that eventually they will pay the price, because
they won't get the quality distribution if they're going to allow the lower quality distribution
to take place.
But if they continue to allow parallel distribution of their products, would you, as a business,
elect to delist them?
Yes, I think we would.
Our first response to it is, of course, to work with them, because it's a problem that
many of them didn't ask for and certainly aren't creating.
We work with them, we help them solve the problem and discipline their distribution.
In the end, though, yes, we would.
The suppliers we interviewed, however, fully accept their responsibility towards policing
distribution and are quite aggressively rooting out any suspect customers.
Together with the high cost of retailing, I think that discounting is the single largest
challenge to our business today.
It is affecting our business severely, particularly in Hong Kong and Singapore, but it has spread
now to Taiwan, and we are seeing both in Australia, in Indonesia, in Thailand, and in Japan, and
in Korea, that it's starting slipping in.
But in a major organized way, clearly Hong Kong, Singapore, and Taiwan are the major
problems for us.
As I touched on earlier, the key thing, in my view, to be completely honest, is there's
only one person to blame for the fact that we have parallel and that's the supplier.
If we can't control distribution ourselves, obviously we will have that parallel.
So it's a matter of us getting serious, of being willing to forego turnover in the short
term and really tighten up, because we all know, more or less, who the suspicious suppliers
are.
And I really think there is a need for the industry to get together and say, let's once
and for all clean this up, at least the major big players.
Of course we cannot avoid that we will always have the suitcase suppliers and the guy buying
36 pieces and selling it back in his home country.
But in a major organized way, we cannot have retailers in this part of the world having
15 stores and saying at the same time, we don't know where it's coming from.
I mean, the volumes are so big that we have to manage our suppliers.
And I regret that we as an industry haven't been able to curb that in its infancy.
You have to be very careful how you manage your business, because you'll find the product
has a way of moving from a genuine customer to a non-genuine customer.
So you've really got to watch where you're selling, the quantities you're selling, and
it's an ongoing job to keep this under control.
And we're determined to keep a focus on this, because actually we did at one time, I don't
suppose, have too much product out there.
I suppose that's a fact.
Now I think we've got that under control, but it's continuous vigilance.
You've really got to be on the case all the time.
Well precisely how do you police the channel of distribution?
You've really got to understand what is the likely purchase of any particular customer
and then watch for the order patterns that come in.
I mean if someone's got three shops and they want to order a thousand units of Fifth Avenue
you know, and that doesn't seem very likely order.
Policing distribution of course costs money to the suppliers in the short term, so suppliers
have to take a long term view.
Well discounting is hurting us mainly I would say in Hong Kong, in Singapore.
The main source of discounting is the parallel, let me be clear.
So we have since a year ago taken strong steps against the parallel in the region.
We have changed quite a few agents, we have revised our pricing policy, and even in Europe
we have for example cut what was the biggest source of parallel, which was Italy, and we
are today at minus 40% in Italy because we want that to be.
Therefore we are taking a strong position against parallel and we believe that the discounting
problem will be then reduced.
Well it is of course inevitable that Asia is subject to the same cyclical movements
as the rest of the world.
And today clearly the problems that more mature markets like Europe have been facing for some
years are starting to emerge in the Asia Pacific region too.
The fact remains however that the fragrance and cosmetics market in some of these countries
is still hugely underdeveloped, therefore there is still room for continued optimism.
For some time now everyone has been talking about China with huge excitement.
With a population of over 1 billion and an increasingly strong economy, China could be
the great panacea that everyone is waiting for.
And many companies are already investing heavily there.
We are already putting a considerable investment in that market.
The number one visitor market in Hong Kong is from mainland China.
We have dedicated our Hankow Center store, the flagship store that we opened in the early
70s, now to those customers.
Since we embarked on that project, coincident with the opening of Sun Plaza in the middle
of last year, we have learned a tremendous amount about what this customer wants.
We have had our ups and downs, it has been overall a success and we are moving forward
with that.
We asked the suppliers which areas they are putting their money on.
In terms of growth, there is no doubt about it, China is really moving.
Korea is also moving very fast.
Southeast Asia has been a little less active.
Some of the currency developments recently probably aren't going to help.
I think China is the big game really.
And after China comes India, which I mentioned earlier.
That's maybe only one to two years away before India becomes much more important in our industry.
In the short term, meaning over the next couple of years, there is no doubt that the anchors
of the business in cosmetics and for Geylang therefore is still going to be Japan, Korea
and Taiwan.
Obviously, Japan has sort of leveled off and then the big potential in the short term are
Korea and Taiwan.
We have as a company, beyond this short term thinking, identified Indonesia and of course
China as the major, major potentials for the future.
And ultimately, India will come on stream.
Well, today you have the regular market as Hong Kong, Japanese duty free and Korea, which
is still very strong.
But if you look in the future and if you see what's happening now with all the turmoil
we have in economics over there, probably Indonesia has got the best, I mean the best
potential for the future.
For that you have to talk facts and if you see how much the retailers are investing now
in this country, it's just unbelievable.
But I think this is for good reasons.
The economic fundamentals in this country are very good for the future.
So probably number one would be Indonesia.
Of course, we're going to talk also about India.
India is such a big country and they need to open up their economy and it will happen.
It may be happen much faster than for China.
So probably it had to do ranking with new emerging countries, the region would be Indonesia,
India and China, with a question mark about the delay.
As these different regions develop, what sort of buying patterns will emerge and how far
will the investment from these companies in advertising, for example, affect these buying
patterns?
Well, one subcategory which is being given quite a boost in the region due to serious
investment is fragrances.
Now historically and culturally, fragrances have played a minor role in Asia.
Whereas fragrances represent around 50% of the market in Europe, for example, in Asia,
fragrances account for just a third.
Cosmetics in Asia have traditionally been far more important and still are.
However, things may be changing.
The weight of investment from fragrance companies in the region, plus the influence of increasing
numbers of younger travelers from Asia seeking to adopt European styles and fashions may
finally be starting to pay off.
This is also still good and increasing the customers to use more fragrance than before.
For retailers, DFS and Cathay Pacific, for example, the percentage split between fragrance
and cosmetic sales is 50-50.
Jim Hurley explains why.
Fragrance is a very productive category on a sales per square foot, a profit per square
foot basis.
And necessarily the sorts of service that you have to give in cosmetics requires it
to have more space, more ambiance, more brand imagery, necessarily taking more space.
For the same reasons, fragrances are also clearly easier to market than cosmetics on
board airlines.
So when we asked Andrew Chao of Cathay Pacific whether he saw future growth coming from fragrances
or cosmetics, his answer was perhaps not surprising.
I have to say it's fragrances because it seems that for the past two, three years the
fragrances manufacturers have actually taken fragrances as a fashion item.
So they're changing styles every two, three years.
So it's more exciting.
We see more new launches.
For brands like Escada and Kenzo, whose products are predominantly fragrances, Asia Pacific
holds huge potential.
Well, we have surprised a lot of people in the industry with our fashion fragrance, what
we call our fashion fragrance, which is a limited edition.
We launch every year for a season, which is spring, summer.
And I think that we can, I can say that we are the only one in the industry doing this
concept and it has been very well accepted by the industry and by Asia Pacific, by the
Asia Pacific region and operators because we are different.
And we are looking for products like this and they are looking for products like this.
The cosmetic business is already very strong in the area.
And I think the young, again, the young, affluent consumers are discovering perfume and are
discovering the use of perfume.
It's almost like a new culture.
So the potential development in the perfume sector for me is much bigger than the cosmetic.
The importance of foreign brands has always been one of the truisms of the Asian market.
And this is still certainly the case, even if certain customers are more price discerning
than ever.
Given the access to information today about brands and products, women, particularly Japanese
women are more knowledgeable than ever.
For DFS, Japanese women are still an important customer.
To a large extent, yes, they still are the mother lode.
They are a declining share of our sales.
That's been a phenomenon that's taken place over the last seven or eight years.
But they're still the number one customer.
They're still the lead customer in terms of aspirational brand aspiration values.
Still very important to us.
And most retailers will concede that well-known brands are still as important as ever.
They're always keen interest for the top quality, top brand name, and also very competitive
prices.
Yes, they're very brand conscious and brand loyal.
For any company committed to penetrating the travel retail market in Asia, the domestic
advertising campaign is extremely important.
It is obviously very important.
Let's take Japan.
In Japan, all the big names are brands which have entered the market many years ago by
investing since the beginning.
Therefore, like I said earlier, it is very costly today for Kenzo to do a lot of advertising
to come in the leaders in Japan.
This is the reason why we are focusing our investments and establishing our brands in
the other countries in the area.
In general, the Asia monk is very image conscious and you really do have to be advertising.
You really have to have good distribution as well.
And if you fail to do that, then you will suffer.
One of the reasons I think our business is coming back pretty strongly in Asia Pacific
is because we're putting more advertising and we're focusing on getting our image up
in the region and that shows it's a very important thing, more important probably than
elsewhere in the world.
But effective advertising campaigns are welcomed by duty free retailers.
Any excitement about a new product created on the local market will usually have a knock
on effect in the duty free stores.
Fragrance for example, it's new product launches.
If there's a new launch of a fragrance that gets a lot of worldwide publicity, it can
leap to number one on the list very, very quickly.
That didn't tend to be the case five, ten years ago.
Product launches were important, but to have a product launched in one month and three
months later be the number one selling item happens more often now than it doesn't.
Now exclusive products have been a part of Asian duty free for some time, starting with
multi-packs which were a happy solution for Asian travellers looking for gifts to take
back home.
We asked the retailers whether exclusives were still an important business.
We would actually like to see more exclusives available to airlines or even a duty free
industry in order to combat the threat posed by these parallel importers.
If you take the example of the latest results from our business, we have just listed the
Champagne Gaultier Cofre Set and it's a limited edition as well, so it's a combination of
multi-packs and limited edition and has been the very best seller of Cofre sets for Canter
Pacific.
So are Cofre sets generally still working for you?
Yes they are.
I think it has to do with the gift purchasing mentality of our passengers.
It is a very convenient gift.
You can suppose to satisfy three or four different friends at the same time and even for the
travelling husband which basically have no knowledge of buff frequencies, it's a safe
bet.
Are multi-packs and exclusive products important to you?
They are and for a number of good reasons.
The customer wants to see something new when they shop and these products represent a new
format, a new way of packaging the product even if the difference is somewhat subtle.
Duty free has always been at the forefront of multi-packing.
And that's because customers are either wanting to stock up for their own use or indeed are
buying gifts for many people.
So that continues to be an important initiative and different ways of packaging those products,
different combinations of products, putting them in sets continues to be a major initiative
for our company.
And exclusives?
Exclusives are important and again because the customer wants to see something they can't
get in their own country.
It's an important attribute.
It shows up in our research, continues to show up and we want to bring it to life in
our merchandise assortments all the time.
But if suppliers and notably European suppliers wish to successfully penetrate the Asia Pacific
market it's not simply a matter of putting three products into one box.
It also requires a full understanding of the people who really matter in this business,
the end consumer.
There's only one way to sell the customer out here and that's to understand that customer.
You have to be here, you have to research the customer and you have to react.
They have to look at the Asian market in a different light as compared to the European
market.
In the European market in my understanding is people are more inclined to purchase and
wear frequencies whereas for the Asian market it's a totally different concept of wearing
frequencies.
So it's actually a new challenge for the suppliers.
Some suppliers have been doing just that, developing products specifically for the region
for some time now.
Others are just catching up.
We asked the suppliers whether being regionally focused is important.
As you may expect the responses vary.
We have been offering specific products in the region for four years now, four or five
years.
Basically the specific product for us is multi-pack.
This is due to the Japanese pack's habits.
They want to, they look for a saving first and when you sell a multi-pack this is more
savings so in this case we do a lot of multi-packs.
The other specific product we have concerns some, let's say some kits.
Inside of it you can include different, I mean small size products and Japanese travelers
are also working on that.
Essentially our business is a global one but you've got to start somewhere in the way you
perceive your business and next year in particular we're going to be launching products which
have an Asian focus.
So we have moved our thinking on that.
It's not so much a product developed for America or Europe which goes to Asia Pacific.
Increasingly now in a real way you'll see we'll be launching products that are designed
first for Asia Pacific and then may go global but it's where you start from, where does
your thought process start from?
This region is a particular cosmetics region and the need and the demands from the markets
and the consumers does simply justify that we develop specific products for this part
of the world.
In skincare it is obvious that whitening is a product that is exclusively developed for
this part of the world.
We have done a lot of research into that in Asia.
We have just finished in the last couple of months tests in Taiwan, in Japan, in Hong
Kong and other markets of a completely new line that we will launch dedicated to this
part of the world next year.
As far as makeup is concerned, yes there are clearly different color preferences in this
part of the world than in Europe and North America and we have between 8 and 16 shades
in every color range coming out that is completely dedicated to the Asian market.
But not all companies take a regional approach.
Escada for example takes a think global act global approach.
Escada is one fragrance, Escada is one packaging, Escada is one by itself so we don't have
to be specific.
The consumer is his travel habits, a product adapted to his travel habits and a product
adapted to the gift habits he has.
We know the Japanese like to give back when they are home a lot of products to France
so we have to be adapted to that.
But my product will stay the same.
But as Peter Midwood points out, the retail experience can only work if suppliers and
retailers work together.
I think it's about communication, particularly trying to get excitement.
Retailing is about magic and getting excitement in store and you can't do that in isolation,
we can't do without them and really they can't do without us so it's about that.
It's not easy to get people to buy and you're going to have to create a really good environment
to do that and that's up to both of us.
And this is a point which is strongly backed by others.
What we can do in-flight is to try to offer more limited editions to passengers and more
good better value for passengers.
We have to look for brands which are actually is really making an effort to try to stop
these parallel imports so it's actually more of a cooperation between us the retailers
and the manufacturers themselves.
You certainly have to create the brand image, you must position your brand or at least with
the Japanese consumer you'll be nowhere.
But it's also fair to say that you must stimulate the purchase at point of sale and that's
where the special packaging for duty free and for companies such as DFS comes into play.
So greater excitement at point of sale is definitely one of the issues but probably
one of the most sweeping reforms of duty free retailing worldwide began in Asia and that
is the move towards self-service or rather assisted self-service.
This was pioneered by DFS some years ago and rapidly became a feature of the region.
In the last three to five years DFS certainly converted all its cosmetic departments to
what has been called open-sell, you refer to it as assisted self-service but make no
mistake about it, it's a full service department.
It's far less intimidating though for a customer to deal in that environment, in that open-sell
environment than it is across a counter but service is still as important as it ever was.
And with or without the service you've still experienced an appreciable increase in sales
as a result.
And sales productivity, sales per square foot, that's correct.
Nuance two is reaping the benefits.
I certainly think that the open-sell easy access concept is the way to the future.
It is a concept we've introduced in any new store that we've developed.
We've put it into both terminals in Sydney Airport which the last one, Terminal C, was
done just recently.
We're currently redeveloping Auckland Airport and we're putting open-sell into Auckland
Airport.
We tend to not do it in landside stores because of a shrinkage issue but in any store that
is either airside or an Asian store we tend to go with open-sell.
It's certainly the way of the future.
We also asked some of the suppliers whether the introduction of assisted self-service
in the region had proved positively incremental to their business.
Peter Midwood shares a common agreement.
Oh I think so.
We'd certainly look for 20-30% extra from the same space and indeed we're developing
new units which we're planning to reveal in Cannes will be quite interesting.
Yes, we think that's a good idea.
We were going to encourage it as far as we can with the retail parts that we've got.
So we've looked at the problems of the region.
We've discussed the call for more distribution control, more excitement at point of sale,
more product focus and more mutual cooperation.
But long term what are the prospects for the region and are the suppliers justified in
thinking that sales in Asia-Pacific might just make up a shortfall in profits in the
event of intra-EU duty free being ousted at the end of this decade.
We asked whether Asia-Pacific duty free could fulfill these expectations.
Not only is the demand still there, there's still tremendous growth potential, particularly
in mainland China, but also in all the emerging Asian countries.
Markets and fragrance still penetrates at a relatively modest level.
Now whether it can cover off the loss in intra-European duty free, I don't really have a feel for
that, but there's certainly tremendous future growth potential in Asia-Pacific.
Well, I would say the Asian market has definitely had the potential to fulfill these expectations,
but the suppliers and the manufacturers have to be very creative in actually trying to
penetrate this market and try to make up for the shortfall in the European market.
And do they still predict growth in the region?
Yes, I think so.
Still the cosmetics and fragrances will increase in our duty free shop.
Yes, I still expect to see growth, be it all that our business is difficult at the moment.
We've had declining numbers of Japanese visiting and declining spend, but I'm still optimistic
about the industry and believe that it will grow in this region.
So for those suppliers focusing more on Asia, they have to undergo a radical rethink in
approach with more focused concepts, promotions and products.
Are they still as optimistic now as before?
I don't see that why Asia is not going to stop growing.
Asia, on the contrary, is going to be the biggest growth in the coming years.
As far as Asia-Pacific is concerned, this region still offers a tremendous potential
for the future.
Especially the number of traveling passengers, which will be over 100 million within four
or five years from now.
I mean, definitely the facts are here.
The reality is there to offer a tremendous growth in the long term.
The potential in this region is still enormous.
I mean, only a few percent of the Koreans are traveling.
The Chinese haven't started yet, of course.
I mean, the future potential is almost impossible to imagine.
But it's not like in 1999, if intra-EU duty-free is banned, that it will sort of, from Monday
to Tuesday, make up for it.
And I think people back in Europe and in North America really have to make sure that they
don't dream about it.
Because also Asia is not one thing.
We have mature markets, we have less mature markets, we have emerging markets.
We're there to solve their problems.