Hong Kong MTR Dufry Shops Show Asian Ambitions

The state-of-the-art West Kowloon Mass Transit Railway (MTR) Station on Hong Kong’s impressive skyline opened in September 2018 as well as Dufry’s duty-free stores. In March of the same year, Dufry has won a five-year contract to run stores in the new station, which is part of a new high-speed railway connection with mainland China.

Dufry operates duty-free shops with a total floor space of 1,500 m² on both the departure and arrival sides of the West Kowloon terminal for the Guangzhou-Shenzhen–Hong Kong Express Rail Link. The departures flagship store spans over 1,200 m², and the arrivals shop 300 m². Both stores highlight Dufry’s travel retail expertise and are tailored to meet the needs of Chinese and Hong Kong travelers across the core categories of beauty, liquor and tobacco, confectionery, and fashion, as well as health and wellbeing, which is a very important category in the Asian market. Terminal Manager Jenny Li comments, “Our best performing categories are liquor and tobacco. These two categories account for almost 75% of our business thanks to a large assortment of Chinese tobacco and cognac brands and our best-selling Moutai (a distilled Chinese liquor, made in the town of Maotai in China's Guizhou province). We are now investing in space to support the development of trending sub-categories such as Malt Whisky and Health & Wellbeing products, which are extremely popular with Chinese customers.”

Andrea Belardini, Divisional CEO for Asia Pacific and Middle East underlines the importance of this special operation: “Today our duty-free shop is arguably the largest duty-free shop operation in any railway station in the world. Years of preparation have gone into preparing to participate in this highly competitive bid, and in the run-up to submitting our proposal; we tried to develop the best possible intelligence by analyzing passengers’ profiles, reviewing performance of adjacent businesses, and creating scenarios to simulate the effect of specific spend-drivers in a train station.”

The West Kowloon station is part of a 140 km express rail link operating between Guangzhou in the south of mainland China and Shenzhen, which is adjacent to Hong Kong. The railway link cuts travel time between Hong Kong and Guangzhou roughly in half, to about 50 minutes, bringing an expected rise in tourist and business traffic to the dynamic city, which is also a top choice for luxury shopping.

Hong Kong is known as a glamorous and vibrant city and is also recognized as a global business and financial center and a tourist destination. As such, Andrea Belardini is very enthusiastic about the opportunities. Recalling the opening of this development, he says, “One of the most exciting bits was meeting the deadline for the shop construction. Not any standard deadline though! A few days after we were given the space, we were told that the government was planning to inaugurate in just 65 days! I can’t praise highly enough the incredible efforts and professionalism of the wider Dufry teams that made it possible to deliver against this tightest of deadlines and helped demonstrate the strength and responsiveness of our company! You can imagine the level of apprehension over the days before the opening! I will never forget the first day of trading. We were walking up and down in the shops with the teams and checking the sales progress at the tills every half hour. What we could see was definitely encouraging, but nothing was more encouraging then closing the first day of trading with sales exactly in line with the business plan!”

Chinese customers respond very positively to promotional activities. They like to discover opportunities to win something, whether a discount or gift. We have partnered with the largest payment systems in the market, Alipay and Wechat, and online tour operators like CTrip, to create joint promotions and offer discounts to these customers to help further boost sales. In addition, the Dufry RED loyalty program is helping to drive footfall into the MTR stores and has become very successful with frequent travelers who use the MTR and at other Dufry airport locations in the region.

The MTR operation includes an arrival store for which a specific wine store concept offering up to 25% discount when buying 3+ bottles was developed. This promotion has become very popular among frequent MTR travelers. Starting in November 2019, free home delivery to Hong Kong residents buying at departure and arrival stores is another initiative expected to be a very successful, based on surveys we conducted earlier this year.

The sales staff at the MTR Dufry shops particularly enjoy the fantastic working environment. For example, Leung Kei Oscar LAM, Shift Supervisor, comments, “I used to work in our Sound & Vision electronic store at Hong Kong International Airport, when I was offered the opportunity to work in MTR in a multi-category store. This gave me the chance to learn new retail best practices such as the use of mobile tills to reduce waiting times for the customers during peak hours, the use of the RED by Dufry app, Alipay, and WeChat to promote add-on sales, and of course learning about new categories. I am delighted to work in this brand new retail environment and to develop such positive and close working relationships with other members of the MTR Dufry family”. Ka Man Karman NG, Shift Supervisor, also expresses his satisfaction: “Great teamwork is a key part of our success and is really evident within the team, from the sales staffs to the cashiers, particularly as our customers usually have a very short amount of time for shopping. The exposure to other categories and specific brand training to upgrade my retail skills have all been a great learning experience. It really is great to be part of the MTR Dufry family.”

Finally, after more than a year of operating these shops, Andrea Belardini sums up the experience: “We are very satisfied with the performance of this new business. The reality, however, is that we were dealing with a significant business and the associated risk that it did not have a previous trading history. Since then we have continued to build on the learning curve and delivered a continuous increase of the ‘spend per passenger’ that, a year later, is up 42%. Of course, we are now dealing with the challenges posed by the social unrest in Hong Kong, which has caused a reduction in traffic. However, we are taking a very proactive stance as we work closely with the landlord to identify jointly development opportunities.”

Hong Kong West Kowloon Station is conveniently located next to the West Kowloon Cultural District. Its unique architecture and beautiful landscape make it a new hotspot for tourist visits and photo opportunities. There are 3 hectares of public space outside the station, including the Green Plaza and Sky Corridor with stunning views of Victoria Harbour as you walk along the Sky Corridor to the rooftop of the station.

By Lubna Haj Issa