NEWS/ANALYSIS: ISRAEL AIRPORTS AUTHORITY
“We have huge challenges facing us, but are dealing with them. This is our job. Who would need us otherwise?”
Yoram Shapira, IAA
has changed the world and the way consumers handle their retail. We must be more competitive than previously. “We have always told consumers
sold, but this does not mean increased basket size. Customs regulations are also
proving an obstacle. In 2013, the Israeli government slashed the tobacco allowance for returning nationals by 50% from 250 cigarettes (or 250g of tobacco) to 150g or one carton instead of two. At the time, IAA told TRBusiness the
change would have a ‘big impact’, but suggested contingency plans were in place for such eventualities. Shapira remarks: “It was a huge change. That is all I can say.”
Key challenges He also highlights other key issues and challenges prompting alterations to the duty free contract structure. “In Israel, we have tax and duty
and the government policy is to reduce the duties,” he comments. “As a result, the advantage we had
over the high street has reduced. This is why we have to lower prices.” E-commerce is also a massive
challenge with consumers able to purchase anything, anywhere and at any time. “There is the new generation
that use e-commerce or mobiles to compare prices. The mobile phone
they would get a good deal. Now we must prove they will get a good deal because they can now sit at the shop and compare prices.” Consumers are not the only ones
comparing prices, according to Shapira. “We also compare prices and try to ensure they are cheaper than elsewhere and that we offer a very good quality service. Otherwise we lose the market.”
Combing digital and physical Finding the optimum combination between digital and physical is key to the success of any airport commercial operation. “We want to have the consumer
in-store,” he acknowledges. “Then it is our job to try and sell to them. We know they like to touch and feel products, which is why dwell time has become much shorter.” Then there is the online pre-
order element, which the winning company or companies of the recent duty free tender was obligated to set up. “Customs regulations do not
permit products to be paid for without boarding passes, so pre- ordered items must be collected in-store. “We know 40% or 50% of
consumers re-purchase in-store when collecting their items so we want to give them the platform
to buy through all kinds of offers and promotions.” Taking the above market changes
into account, sharing the risk with the retailer was a major priority when finalising the new contract terms. “Often, it is the retailer which
tends to take risks [when it comes to contracts],” says Shapira. “At the end of the day, the risk
costs landlords money as retailers make the relevant calculations and end up paying them less. “If you let retailers know you are
willing to share the risk with them they are more likely to be ready to pay more.” IAA clearly had to plenty to ponder
in recent times, but the joint venture between JR/Duty Free and Gebr. Heinemann seemingly represents a breath of fresh air in a period of significant change. Shapira offers his own personal
view. “Because there are major changes in the duty free market, I believe this kind of joint venture will prove very helpful in running the business. “When two global companies
unite to offer services at Ben Gurion, their global experience really gives us an advantage. This is one point of view. Another is the benefits for consumers. If a passenger is from Oslo, for example, where Heinemann is present and needs some kind of assistance having purchased something from Ben Gurion, they can receive assistance on their return home.” Then there is the pricing benefit.
Shapira adds: “The joint venture means products can be purchased at better prices and items will be cheaper in-store.” Looking ahead to the rest of
the year, there is plenty room for optimism despite the various obstacles and challenges. “Despite everything that went on
last year was still a good one. Average spends increased in some categories and decreased in others. “Things will pan out even better
this year if early indications are anything to go by. “We have huge challenges facing
Beauty brands in abundance at Tel Aviv Ben Gurion International Airport. 28 TRBUSINESS
us, but are dealing with them. This is our job. Who would need us otherwise?” «
MAY 2018
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