2020 Challenges to Travel Retail
This article aims to briefly highlight the various challenges facing the travel retail industry in 2020 and provide some insight into the issues from the travel retail perspective.
Brexit & the Excise Duty Directive
At the end of the transition period, 1 January at the earliest, the European Commission has confirmed that under existing rules the UK would be treated as a third country and consequently, duty and tax free sales should be permitted for EU-UK passengers and vice-versa, as is the case for passengers to and from other third countries.
Exact details of how this will function heavily depends on the outcome of the future relationship negotiations, as well as if the UK decides to trigger an extension to the transition period.
Throughout 2020, ETRC will be working closely with the European Commission, EU Member States and UK governments to ensure we get the best operating possible conditions for retailers and suppliers after 1 January 2021.
Air Passenger Rights
Retail is the largest single component of non-aeronautical revenues at European airports and is particularly important to the funding of some smaller airports, which struggle to break even. Given the intense pressure upon airports to lower charges to airlines, creating the conditions for a strong retail and commercial business is the only way that many of these airports will be commercially viable.
The travel retail industry believes that the current revision of the EU Regulation 261/2004 on Air Passenger Rights presents a unique opportunity to enhance passenger rights, to protect their interests and provide a permanent solution that safeguards airport retail revenues against future airline policies. ETRC calls for the Regulation on Air Passenger Rights to be amended to allow passengers the right to bring airport purchases on-board at no extra cost and in addition to the prescribed hand baggage. The revision of the Regulation provides a unique opportunity to protect passengers’ interests and to permanently safeguard essential retail revenues for European airports.
The position of the European Parliament, adopted in 2014, included a provision allowing for passengers to bring at least one bag of airport shopping free of charge in addition to the prescribed hand baggage. The priority for the industry in 2020 is to ensure this amendment is preserved, by engaging with the relevant stakeholders in the process. The Croatian Presidency have reopened discussions and aim for Council to adopt a common position on air passenger rights by the end of June.
ETRC therefore asks that the revision of EU Regulation 261/2004 includes a clear and unambiguous reference to the right of passengers to carry onboard personal items, including airport purchases, at no extra cost.
Sustainability and responsibility
Sustainability will be a big topic for the travel retail industry going forward, and were the key themes underlying the discussions at the annual Business Forum of the European Travel Retail Confederation (ETRC) which took place in Amsterdam in January.
Customers are increasingly concerned with sustainability, and the duty free and travel retail industry need to disrupt or be disrupted. ETRC is working with key stakeholders to establish best practices in the sector that will benefit both the consumer and industry. As a first step, ETRC have collaborated with Pi Insight on research into the role of sustainability on the consumer’s decision making process, with the results also being presented at the annual Business Forum in January.
As part of ETRC efforts to drive the channel towards an action-orientated approach on sustainability, ETRC issued in February Recommendations on Use of STEBs and carrier bags in Duty Free and Travel Retail.
These recommendations are aimed at supporting retailers, airports and airlines to minimize the environmental impact of their operations while taking into account specificities in terms of security, safety and operational requirements, by encouraging a correct and responsible use of STEBs and carrier bags in Duty Free and Travel Retail.
Labelling requirements and a digital platform for the industry
One of the key challenges for the industry is increased labelling requirements across food, alcohol and beauty products. To meet this challenge, the ETRC Digital Platform is moving to phase 2 in February 2020. The aim is to create a fully functional digital platform to give consumers access to product information in multiple languages duty free and travel retail, and to collect consumer feedback to support advocacy campaign.
The benefits of such a platform are multiple. From a business perspective, it preserves travel retail exclusives, facilitate supply chain processes and reduce costs from onerous labelling requirements. From a consumer perspective, it will increase transparency and interaction. From a sustainability perspective, it will help to reduce overall packaging in products.
The second Meeting of the Parties to the Protocol to Eliminate Illicit Trade in Tobacco Products (MOP2) will take place in November 2020. A decision was taken at MOP1 to delay a study looking at the extent to which duty free contributes to illicit trade. Instead of commencing work on the study, the WHO member countries decided to produce a Roadmap for the Duty-Free research, which will be presented at the meeting in November. This Roadmap will set out the timelines and steps required before initiating the evidence-based research.
The industry, led by Duty Free World Council (DFWC), is campaigning in 2020 for the study to only be commissioned once all the active provisions of the ITP have been implemented and that any research must be transparent, independent and with full industry participation.
Author: Julie Lassaigne, Secretary General of ETRC