It is possible, some say, that the ending of duty free could stimulate
a greater demand for airport ads. Can it be true, Richard Cook asks
Next year the oldest duty free airport shop in the world, at Shannon in
Ireland, will celebrate its 50th birthday. It might be well advised to
enjoy the anniversary while it can. Eighteen months later, according to
a decision taken by EU finance chiefs back in 1992, the dollars 5
billion European duty-free business will abruptly cease to exist. D-day
for retailers, manufacturers and their advertising agencies is midnight
on 30 June, 1999. After that, duty free will still be available to
passengers heading out of the EU, but not to the estimated half of all
European travellers whose destinations lie within the union.
To get an idea of what this might mean, you have to consider the
numbers. In the UK alone, according to the airport licensee, BAA, which
operates all except Manchester and Luton of the largest UK airports,
every single departing passenger spends an average of pounds 45.74 in
the duty-free shops and at the tax-free outlets that will also be
affected by the ban. A bottle of whisky is sold every six seconds in
duty free in this country.
A million gallons of wine and spirits are sold every year at Heathrow
alone, while a quarter of all film dispensed by Dixons is sold through
its airport stores.
For licensees such as BAA the effects of the proposed ban will be
painful enough. The operator estimates that even with the rebates it has
been offered, the ending of duty free will cost it about dollars 47
million a year. Airline ticket prices, it estimates, would have to
increase by dollars 15 a head to cover this shortfall. But for the
advertisers the picture is even bleaker.
A survey organised by the European newspaper of major spirits and
fragrance brands found them gearing up for the disappearance of up to
half of their market if duty free were abolished.
Most have been quick to join lobbying organisations such as the
International Duty Free Confederation and the European Travel Research
Foundation to press their case to Brussels before the 1999 deadline.
The ETRF is providing ammunition for this lobbying in the shape of
research showing that abolition would mean the loss of up to 100,000
jobs in EU countries, an increase in airport charges of up to 40 per
cent and, consequently, higher air fares.
‘It seems ridiculous to us that this ideology of wanting to do away with
duty free should go ahead if it is simply to cause more job losses and
lead to an increase in travel charges within the EU,’ says Charles
Garside, editor-in-chief of the European, which is campaigning against
the ban.
‘The French perfume industry, for example, is predicting horrific
effects should the trade be curtailed. At a time when a lot of people
are asking what the EU is doing for them it isn’t the greatest PR in the
world to press ahead with proposals that will lead to job losses and
increased fares. People will effectively have to pay more for air travel
just as something they see as a perk is ended.’
One of the biggest potential hazards to the success of the lobbying
process remains consumer ignorance. Despite the fact that the decision
to abolish duty free within the single market was taken as far back as
1992, the message has not yet made it to the consumer, more than half of
whom, according to a survey carried out by the European, are unaware
that any changes to duty free are planned.
For advertisers, their agencies and media buyers, the planned changes
present a rather more uncertain challenge.
‘There is an argument that the ending of duty free may actually
stimulate more demand for airport advertising,’ Guy Cheston, managing
director of the UK’s largest airport contractor, Sky Sites, says. ‘The
point is that brands will have to work far harder to promote themselves
actively, but the fact is that we don’t really know what the effects
will be.’
Around a quarter of Sky Sites’ revenue is derived from the unholy duty-
free trinity of cigarettes, drink and perfumes and it is this revenue
that would seem to be under the most pressure. The medium will, however,
retain one crucial advantage, certainly for the first two categories
well after 1999. Airside advertising will remain apart from any national
advertising restrictions, which should help to shore up demand in the
immediate aftermath of the duty-free changes. For the non-traditional
airport advertisers it is a question of seeking to target first-time
users of the medium.
‘The airport advertising concessionaires have known for some time about
the impending duty free sales ban in 1999,’ Michael Segrue,
international director at the specialist, Poster Publicity, points out.
‘They have invested considerable time in broadening the advertising
client base to lessen the effect. The cancellation of some long-term
contracts on the airside of the airport will mean that other advertisers
may have the opportunity to buy high-quality advertising at better
rates.’
Others are less sanguine about the effect of the planned changes.
Garside points out that duty free is a function of habit - once that
habit is removed, the demand may disappear too.
‘I don’t buy the argument that says advertisers can just advertise more
to help nurture demand. Duty free works because it encourages shoppers
to become the holders of goods, not the retailers. People buy things for
future consumption in duty free in a way they don’t in any other retail
environment in the world. And advertising is not going to change that.’
In the meantime, we are left with a frenzied 18 months in which to stock
up on as many cigarettes, bottles of perfume and malt whisky to last us
a lifetime.
