AAL American Airlines Group Inc

By Scott McCartney 

GRAPEVINE, Texas -- Here's a little secret about airport shopping: You don't have to hold an international ticket anymore to buy at many duty-free shops. And another: It actually can be a pretty good deal.

In the age of online shopping, retailers are finding that airports can take some of the sting out of declining mall traffic. Travelers have time to kill and money to spend when they're captive inside airport security. Major airports around the world, from Singapore to Dubai, London to Beijing, have essentially become shopping malls with gates.

And the U.S. is finally starting to catch up. Just as they have upgraded restaurants and basic amenities like power outlets, U.S. airports are finding they need to improve duty-free stores, which have become a necessity for many world travelers who routinely stock up on perfume, cosmetics, alcohol and chocolate coming home from trips.

Airports like duty-free shops because they get a cut of the revenue; luxury-goods makers like the chance to interact in person with shoppers; and customers like the convenience, savings and opportunity for capricious purchases.

Duty free began in Ireland in the 1940s as a way to stimulate spending by waiving taxes for people who were heading out of the country. It's grown and liberalized over the years, and definitions and qualifications vary in different countries. But the basic premise has become as omnipresent for travelers as neck pillows and bottled water.

Dallas-Fort Worth International Airport opened a duty-free mall inside its main international terminal in December. About the size of a Walgreens or CVS Pharmacy, the area isn't labeled duty free because that tends to drive away domestic passengers, who think they don't qualify. In fact, U.S. shoppers can now buy everything except cigarettes and alcohol, and in many locations it's all tax (aka duty) free even if you aren't leaving the country, because of agreements negotiated with state and local taxing authorities.

Mauricio Gonzalez, who lives near Mexico City, recently made his second stop at the DFW duty-free store while on a business trip. He bought chocolates for himself and perfume for his wife.

"The variety is good," he says. "I don't know if the prices are good, but the convenience is."

Name-brand cosmetics and perfumes especially can be cheaper at the airport, with special packages, quantities and, for some brands, unique products. Other items can be hit and miss.

Among the more unique offerings: Sculptures by well-known Texas artist James Surls, including a tabletop flower bouquet for $7,000 and a giant wall-hanging of his signature flowers for $250,000. If you need a $2,600 cowboy belt buckle, this is the place.

Katherine Choi, who lives near Houston, stocked up on tequila and chocolates on a recent trip to Seoul to see family. She and her husband used the duty-free store so they wouldn't have to put the gifts in their luggage, where they might get damaged, lost or stolen. "It saves time because you don't have to go to a local store," she says.

DFW says it removed some seating areas in Terminal D to make way for the new store, a move agreed to by American Airlines, user of the nearby gates. Taking away seats means pacing passengers are practically forced to peruse products.

American also agreed to put long-haul international flights at gates near the store, and the airport purposely put it right in front of the terminal's busiest TSA screening checkpoint. It's not like some international airports, where passengers must walk through duty free to get to gates, but it's close.

"Were we intentional about this? Yes," says Sean Donohue, DFW's chief executive.

The airport's previous, much-smaller duty-free store was quaintly called "The Buckaroo." Mr. Donohue says it "didn't come close to a store you'd see in London or Beijing." DFW didn't have a global airport feel, yet it was trying to attract more international flights, Mr. Donohue says. It wanted to look more like a major international airport.

Airport customer research showed a hunger for high-end retail catering to expense-account business travelers and vacationers dubbed "indulgent explorers," who are willing to spend on unique items, especially local brands. Some travelers do pick flights by the connecting airport, Mr. Donohue says. If they know they can stock up on items they want to buy in the U.S., they may connect in Dallas instead of another hub.

In Asia, it's not uncommon for people to fly off on shopping trips for a wider selection of goods and cheaper prices. That's true in the Caribbean and Mexico, too.

"The ability to shop is very important for some travelers," says Bernard Klepach, chief executive of DFASS Group, the Miami-based duty-free retailer and onboard shopping company that operates the DFW store. "Fine shopping is not for every airport, but it is important to some."

Moët Hennessy, the Paris-based maker of Champagne and cognac, has a boutique in the Dallas duty-free store where it does tastings of rare editions -- a spot of cognac before boarding. The unit of luxury-goods conglomerate LVMH sees airport retail as a chance to educate consumers about its brand. Moët Hennessy has airport boutiques in Paris, Taiwan, Hong Kong and Singapore. Dallas is its first in the Americas, and more are likely.

"The proliferation which is starting in the U.S. is quite new, and we are very happy with it and very proactive," says Laurent Boidevezi, Moët Hennessy senior vice president in Paris.

Mr. Donohue says DFW's duty-free sales were up 47% in January -- the new store's first full month of operation -- compared with the previous year. But the store is as much about entertainment as revenue. "If all I wanted to do was make money, I'd have a lot of restaurants and bars here, and convenience stores," he says.

The store has no doors; travelers just wander through. Brands have their own areas, creating a boutique feel. There is some seating upstairs on an open, second level designed for events such as tastings, entertainment and parties that will lure curious passengers.

While online retailing has curtailed some airport retail business, companies say they are still seeing growth -- stronger than other traditional venues like malls or Main Streets. Dufry AG, the largest duty-free airport retailer, posted same-store revenue growth about 8% in the first nine months of 2017 compared with the same period in 2016. It was Dufry's strongest performance since 2011.

"You cannot smell perfume online," says Mr. Klepach, of DFASS. "It's the theater of retail. People like going in and feeling and touching."

Write to Scott McCartney at middleseat@wsj.com

(END) Dow Jones Newswires

March 14, 2018 09:14 ET (13:14 GMT)

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