Julian Diaz - Dufry The Trinity Forum 2015

1. ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES
Julián Díaz, CEO Dufry AG

2. LEADING MARKET CONSOLIDATOR, REACHING 24%
SHARE
GLOBAL PRESENCE OF DUFRY
67
COUNTRIES
440
AIRPORTS
2’200
STORES
30’000
EMPLOYEES
FY 2014
PRO-FORMA
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 2

3. GLOBAL TRAVEL RETAILER WITH A UNIQUE
WORLDWIDE FOOTPRINT
NET REVENUE
BY REGION BY PRODUCT CATEGORY
CHF 7.8Bn
TURNOVER
FY 2014
PRO-FORMA
BY CHANNEL BY FISCAL REGIME
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 3

4. 1. ONLINE DOWNTOWN RETAILING
• ONLINE IS THE FASTEST GROWING RETAIL CHANNEL
• DIGITAL CROSSES GENERATIONS AND BUSINESSES
• DIGITAL IS BREAKING MARKET BARRIERS
• ONLINE RETAILERS ARE GROWING FASTER
2. CURRENT TRENDS IN TRAVEL & TR
• AIR TRAVEL IS EMBRACING DIGITAL FULLY
• AIRLINES ARE INVESTING HEAVILY IN DIGITAL
• TRAVEL RETAIL IS SLOWLY ADOPTING DIGITAL
3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
• OUR CUSTOMERS ARE TECHNOLOGICALLY SAVVY
• EXPLORING THE FACTS
• THE RISKS OF IGNORING THE FACTS
• THE FULL VALUE OF THIS OPPORTUNITY FOR ALL
• CHANGING THE MINDSET: ROAD TO SUCCESS
ONLINE IS CHANGING DOWNTOWN RETAIL AND WILL
SHAPE TRAVEL RETAIL IN THE NEXT 5-10 YEARS
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 4

5. 1. ONLINE DOWNTOWN RETAIL
ONLINE IS THE FASTEST GROWING RETAIL CHANNEL
Source: www.eMarketer.com
RETAIL ECOMMERCE SALES AS A % OF TOTAL SALES, 2013 - 2018
2013 2014 2015 2016 2017 2018
UK* 11.6% 13.0% 14.4% 15.6% 16.9% 18.0%
China** 8.3% 10.1% 12.0% 13.8% 15.5% 16.6%
Norway 8.8% 9.7% 10.7% 11.5% 12.1% 12.7%
South Korea 8.1% 9.0% 9.8% 10.5% 11.3% 12.0%
Finland 9.2% 9.8% 10.4% 10.8% 11.2% 11.5%
Germany 6.1% 7.3% 8.4% 9.4% 10.4% 11.2%
Denmark 7.7% 8.6% 9.3% 9.9% 10.4% 10.8%
US* 5.8% 6.5% 7.1% 7.7% 8.3% 8.9%
Canada 4.5% 5.2% 5.9% 6.6% 7.4% 8.2%
Japan 4.4% 4.9% 5.4% 5.8% 6.2% 6.7%
Spain 3.6% 4.1% 4.8% 5.4% 6.0% 6.5%
France 4.2% 4.6% 5.1% 5.4% 5.8% 6.2%
Australia 3.6% 4.1% 4.5% 4.9% 5.3% 5.6%
Netherlands 3.8% 4.3% 4.6% 4.9% 5.1% 5.3%
Brazil 3.4% 3.8% 4.1% 4.4% 4.6% 4.8%
Sweden 3.2% 3.5% 3.8% 4.1% 4.4% 4.6%
Russia 2.0% 2.2% 2.4% 2.6% 2.8% 3.0%
Mexico 1.0% 1.2% 1.5% 1.9% 2.2% 2.6%
Argentina 1.3% 1.4% 1.6% 1.9% 2.2% 2.5%
Italy 1.5% 1.7% 1.9% 2.1% 2.2% 2.3%
India 0.6% 0.7% 0.9% 1.1% 1.3% 1.4%
Indonesia 0.5% 0.6% 0.8% 1.0% 1.2% 1.4%
Source: www.eMarketer.com Dec 2014, includes products or services
ordered using the internet via any device. *forecast Set14 ** excludes Hong
Kong, travel and event tickets DUFRY OPERATION
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 5

6. 1. ONLINE DOWNTOWN RETAIL
DIGITAL CROSSES GENERATIONS AND BUSINESSES
Sources: Nielsen «Global E-commerce Report» Aug 2014, AT Kearney «Connected Consumer Study» 2015
AT KEARNEY 2014: SURVEY 10'000 "CONNECTED USERS"
% RESPONDENTS WHO SAY THEY HAVEBOUGHT ONLINEIN THEPAST THREEMONTHS
GLOBAL
AVG. USA UK BRAZIL RUSSIA CHINA
Electronics 77% 83% 84% 86% 71% 96%
Home Applicances 59% 46% 65% 70% 62% 83%
Home Furnishings 53% 56% 65% 48% 43% 65%
Fashion & Apparel 76% 87% 85% 75% 64% 97%
Sports & Outdoors 52% 56% 53% 49% 51% 78%
Beauty Products 57% 50% 56% 59% 53% 85%
Household Items 45% 36% 48% 35% 36% 84%
Groceries 45% 26% 60% 29% 31% 90%
Toys, Kids & Babies 49% 48% 53% 47% 44% 75%
Tickets 64% 74% 69% 65% 51% 71%
Music & Games 62% 74% 75% 62% 43% 69%
Books 73% 82% 82% 75% 52% 89%
Services 76% 80% 78% 70% 63% 87%
"Connected User" are people who say are connected to the Internet at least once
a week
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 6
NIELSEN GLOBAL E-COMM REPORT AUG.2014
% ONLINE PURCHASE INTENDERS NEXT 6 MONTHS, BY GENERATION
AT KEARNEY 2015: SURVEY 10’000 «CONNECTED USERS»
% RESPONDENTS WHO SAY THEY HAVE BOUGHT ONLINE IN THE PAST 3 MONTHS

7. • Zulily implementing Drop Shipping: first collect all orders,
then negotiate package deal incl. delivery to customers
• Daigou: Chinese abroad buy luxury goods for customers in
mainland China
• Alibaba and JD.com fighting to get exclusive rights to sell
key brands
• Google Shopping to follow Amazon’s business approach
• Amazon Fresh now provides same-day deliveries for
Grocery (perishable) products in USA and soon in the UK
1. ONLINE DOWNTOWN RETAIL
DIGITAL IS BREAKING MARKET BARRIERS
Sources: www.parcelhero.com/news, , AT Kearney «Global Retail E-commerce» April 2015
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 7

8. 1. ONLINE DOWNTOWN RETAIL
ONLINE RETAILERS ARE GROWING FASTER
Source: Deloitte «Global Powers of Retailing 2015», 2015
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 8

9. 2. CURRENT TRENDS IN TRAVEL AND TR
AIR TRAVEL IS EMBRACING DIGITAL FULLY
Sources: SITA “Passenger IT trends survey” 2015, SITA “The Future is Personal” 2015, M1nd-set research 2015
EXPECTED GROWTH RATES FOR FAST BOOKING, CHECK-IN,
BOARDING PASS IN 2016
• 97% of passengers bring mobile phone
• 90% use Smartphones
• 10-13% book flights using Mobile App
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 9

10. 2. CURRENT TRENDS IN TRAVEL AND TR
AIRLINES ARE INVESTING HEAVILY IN DIGITAL
Sources: SITA “Airline IT trends survey” 2015
IN FLIGHT WIFI
IN-FLIGHT DUTY
FREE APPS
11% 47%
PERSONALIZATION
AIRLINES ARE WORKING TO BUILD DIRECT CONNECTION TO
CUSTOMER
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 10

11. 2. CURRENT TRENDS IN TRAVEL AND TR
TRAVEL RETAIL IS SLOWLY ADOPTING DIGITAL
WHAT IS DIGITAL IN
TRAVEL RETAIL TODAY ?
• PRE ORDER
• E-COMMERCE & HOME
DELIVERY
• MOBILE APPS &
LOYALTY
• IN STORE TABLETS
• AIRPORT APPS &
WEBSITES
• MAGIC MIRRORS
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 11

12. 3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
OUR CUSTOMERS ARE TECHNOLOGICALLY SAVVY
43%
TRAVELERS USED ONLINE SERVICES TO GET
INFORMATION ABOUT DUTY FREE PRODUCTS &
PRICES*
5-10% COMPARE PRICES ONLINE WHILST INSIDE
THE DUTY FREE STORE**
90% PASSENGERS USE SMARTPHONES
Sources: *m1nd-set research 2015, **Dufry / Nuance market research Dec 2013;
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 12

13. 3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
EXPLORING THE FACTS
ASSORTMENT
ONLINE ALLOWS CUSTOMERS TO SEARCH & FIND QUICKER DESIRED
PRODUCTS. EXPANDING RANGE IS ALSO POSSIBLE
PRICE POLICIES
PRICES WILL BECOME MORE TRANSPARENT AND COMPARABLE,
WHICH WILL AFFECT THE RENTAL CONCESSION FEES
PROMOTIONS
ONLINE PROVIDES EFFECTIVE CUSTOMIZATION OF OFFERS
THROUGH UNPRECEDENT CUSTOMER KNOWLEDGE
ONLINE IS 24 / 7
CUSTOMERS CAN PURCHASE AT ANY GIVEN TIME WITHOUT THE
TIME PRESSURE. PERHAPS, TRAVEL RETAIL IS MORE IMPULSE AND
ONLINE IS MORE RATIONAL
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 13

14. RISKS
LANDLORDS
• Erosion of Duty Free
attractiveness, in
comparison to other
alternatives, leading to
Reduced revenues,
necessary to finance
aeronautical expansion
• Diminished Airport
Customer Experience
BRANDS
• Not capturing full
potential of this
channel with 6.7Bill.
potential customers*
• Uncoordinated brand
exposure (downtown,
duty free, offline &
online)
RETAILERS
• New entrants can
reduce size of Duty
Free Market
• Revenue transfer to
other Channels eg. In-
Flight
• Deterioration of
customer service
quality at the eyes of
customer
3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
THE RISKS OF IGNORING THE FACTS
Source: Air4Casts 2014 > 2016 worlwide passenger figures
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 14

15. OPPORTUNITIES
LANDLORDS
• Incremental revenues
from additional channel
& Points of Sale
• Improved experience
to «always
connected»
passenger
• Enhanced customer
knowledge
• Airports seen as
privileged centre of
retail innovation
BRANDS
• Growing channel at
+320Mill. Pax/year*
• More insightful
customer knowledge
will improve
promotions,
communication &
assortment
• Digital channel
growing 20%+, whilst
traditional channels just
2-3%
RETAILERS
• Better service to
customer: language,
retail advisory
• Wider assortment and
mobile points of sale
• Better targeted
communication &
promotions
• Drive efficiencies
• Educate customers
on Duty Free benefits
3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
THE FULL VALUE OF THIS OPPORTUNITY FOR ALL
Source: Air4Casts 2014 > 2016 worlwide passenger figures
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 15

16. MY VIEW IS...
... THAT DIGITAL IS CLEARLY AN OPPORTUNITY FOR
TRAVEL RETAIL, BUT AIRPORTS, BRANDS & RETAILERS
NEED TO LEARN FROM PAST EXPERIENCES AND WORK
FASTER AND WITH OPEN MINDS TO THE ONGOING
CHANGE
AIRPORTS BRANDS RETAILERS
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 16

17. THE KEY SUCCESS FACTORS: PRE-REQUISITES
LANDLORDS
• Support and Fuel the
idea providing
reduced concession
fees, allowing retailers
to invest
• Provide the required
space for deployment
and allow for other
complementary airport’
services to be
integrated in online
offer
BRANDS
• Dedicated teams &
resources to Travel
Retail digital
• Have a clear view on
how to combine brand
online pages with
Duty Free extensions
• Channel will require
dedicated range,
novelties, promotions
• New Marketing tools
required: Bids,
Auctions, etc
RETAILERS
• Must invest to
develop the channel
and relationship with
customers
• Adjust operational
procedures to ensure
consistent customer
experience
• Acquire necessary
Know-How
3. IS DIGITAL AN OPPORTUNITY OR A THREAT ?
CHANGING THE MINDSET: ROAD TO SUCCESS
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 17

18. Source: Trinity Forum White Paper
• DIGITAL IS HERE AND IS THE FUTURE.
NON ADOPTION IS A RISK
• A JOINT INDUSTRY EFFORT IS REQUIRED TO CAPTURE
THE FULL VALUE OF THIS OPPORTUNITY
CONCLUSIONS
« ... to create a partnership model that encourages world-class
retail standards driven by the needs, desires and expectations of
the travelling consumer (...), which encourages investment in retail
environments and customer service and ensures maximised
returns for all parties – airport, retailers and suppliers.»
The Trinity Forum Mission Statement
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 18

19. IS DIGITAL AN OPPORTUNITY FOR TRAVEL RETAIL?
WHAT IS YOUR OPINION?
WRITE TO DUFRY:
DIGITAL_IMPACT@DUFRY.COM
DUFRY “ONLINE TRAVEL RETAIL: A CHANNEL OF OPPORTUNITIES”: 19

20. THANK YOU!