Duty Free: Winning sales strategy
WHEN THE EU shut the door on the duty-free business during the late 1990s, some hard decisions had to be taken by those companies working in what had until then been a highly lucrative trade. The big and brutal question was quite simple: how are we going to stay in business? Frank O'Donovan, chief executive of Hellenic Duty Free Shops (HDFS), points out that the solution was to change the nature of the company's activities. The former state-owned company was sold off by the government to Greece's Agricultural Bank, which in turn transferred some of its shares and managerial control to a group of strategic investors. These included several leading duty-free companies based in other European countries, such as Germany, Ireland and The Netherlands, as well as Greek entrepreneurs. The firm was refocused on a system of uniform prices for all taxed and tax-free products, with the exception of tobacco.
Mr O'Donovan calls this system the 'travel value concept' and says that, in effect, "duty-free pricing lives on in Greece" for travellers. The strategy appears to have served the company well. Whereas sales had slipped dramatically after the EU trade came to an end, business began to pick up again in late 1999. By the middle of last year, turnover at HDFS had returned to the levels seen in the days when duty-free was regarded as the unquestionable right of any traveller in the union. "We have recovered the lost business in terms of our sales turnover," says Mr O'Donovan. Getting there was not that easy, however, given that the company had to absorb the cost of new value-added tax and excise duties. "It's quite an achievement and we are very happy about it and very optimistic about the future," he adds.
The biggest item looming on the horizon is the new Athens international airport, which is scheduled to open next month at Spata, outside the Greek capital. Mr O'Donovan sees this as a significant opportunity for further expanding the business. "The airport is a major development and there is going to be a very clear demonstration of our evolution into a modern, international, dynamic company, which is what we set out to do in the first place. We are now moving away from the old public sector environment, and we will be capable of showing how we will be able to compete in the international marketplace."
Mr O'Donovan forecasts that the new airport will eventually generate between 40 and 45 per cent of the company's business. We are investing very heavily in the whole set-up so that we can create the best possible opportunity to develop the business fully and improve customer service," he says. HDFS is currently carrying out market research to find out what travellers want to buy as it plans to expand its range of merchandise. Outside Athens, the company is refurbishing its sales outlets at several leading tourist destinations, such as the islands of Kos and Mykonos.
The company is considering the possibility of further extending its activities to include the cruise sector. Further afield, Mr O'Donovan says that HDFS may also expand outside Greece into its neighbouring countries in the Balkans, and possibly elsewhere in Europe and the Middle East. For the time being, however, the home market remains the chief priority. "We want to capitalise on the huge opportunities that exist in Greece at the moment," says Mr O'Donovan.