Published on: 27-Aug-2019
Hong Kong-based luxury retailer DFS Group on Tuesday announced it would shut down its tobacco and liquor operations at Singapore’s Changi Airport as it was no longer “financially viable” to operate at the world’s third-busiest airport for international travel.
The move comes two years after DFS was ousted by a joint venture made up of mainland retailer China Duty Free Group and Lagardere Travel Retail to run liquor and tobacco shops at Hong Kong International Airport.
News that DFS – co-owned by the world’s largest luxury conglomerate Moët Hennessy Louis Vuitton (LVMH) – would not take part in a tender to retain its liquor and tobacco concessions across Changi’s four terminals sparked questions and also emotional responses among Singapore travellers.
Several took to social media to say that DFS – which has been in Changi Airport since 1980 – had been synonymous with airport shopping for the past three decades.
A DFS spokesperson said the group was not giving up on airport retail and that its luxury shopping concessions, which take up 14 stores across Changi, would remain.
The company would continue to operate its 18 tobacco and liquor concessions, covering 8,000 sq m of space, until its lease expires in June 2020. DFS’ luxury concessions at Changi Airport, as well as operations in Singapore’s T Galleria by DFS and the cruise centre, would operate as usual, she said.
The retail group also operates airport concessions and shops in Australia and New Zealand. It is set to open a new store, T Galleria Beauty by DFS, in September at Wynn Palace in Macau – its seventh store there.
The spokesperson said the group would “ensure a smooth handover” to the new operators of Changi Airport’s liquor and tobacco concessions.
While Singapore media reports initially suggested “hundreds of jobs” could be lost, the spokesperson said this was not the case.
The 500 employees impacted by the exit had options to work for the new vendor, other operators in Changi, or be deployed to other DFS stores downtown, she said.
Among the bidders for the concessions are Lotte and Shilla, South Korea’s two largest duty-free companies.
The winner is expected to be chosen by the end of the year, according to Changi Airport. They will take over alcohol and tobacco selling rights for all four Changi terminals for six years, starting in mid-2020.
DFS group chairman and chief executive officer Ed Brennan on Monday issued a statement saying the company had decided to pull out of Changi after assessing the business case for staying on.
“Specifically, changing regulations concerning the sale of liquor and tobacco, against a global context of geopolitical uncertainty, meant that staying in Changi was not a financially viable option,” said Brennan without elaborating.
Retail experts said Brennan was likely referring to Singapore’s tighter regulations on liquor and tobacco purchases.
The cap for duty-free alcohol purchases was from April this year reduced from three to two litres, while tobacco products sold in Singapore must from next July have plain packaging and enlarged graphic health warnings.
Ang Swee Hoon, associate professor of marketing at the National University of Singapore, said: “It looks like the standardised tobacco packaging and curtailment on liquor impact on DFS’ bottom line at Changi. Other airports may not have such constraints and hence, remain lucrative.”
Lynda Wee, adjunct associate professor at the Nanyang Business School, said DFS’ decision reflected how the travel retail market was changing.
“With the emergence of online retailing, accessibility to merchandise choices, price transparency and delivery, travel retail is losing ground,” she said. “Changi Airport has a new shopping corridor, Jewel, so shopping options have increased.”
Changi handled a record 65.6 million passengers last year, and is building a fifth terminal and third runway on the back of expectations of growing travel demand. But the protracted US-China trade war has hit the country’s trade-reliant economy.
Ang pointed out that duty-free shopping at the airport was also not necessarily cheaper. “People think [just because] it’s duty free, things are cheaper. But it’s not. They actually jack up the price and it might be more expensive than what you can find downtown,” she said.
Meanwhile, DFS’ announcement has evoked sadness from some of the brand’s long-time fans.
Kapil Tuli, a marketing professor at Singapore Management University, said the emotional attachment of consumers was understandable given DFS’ long history at Changi.
Traveller Joseph Hiew, who said he had shopped there over the years, wrote on Facebook: “Sad to see them go, their friendly staff and helpful service … bringing back memories and nostalgia.”
Foo Jia Lin, 23, a growth marketing strategist, said she often looked forward to shopping at the liquor store when she returned from overseas trips.
Back to listing