As everyone involved in retailing in Hong Kong and Macau knows well, the past three years has been more than challenging for the industry – not just locally, but globally.

While many retailers and brands hunkered down to weather the storm, trimming store networks, stock and even staff counts, DFS Group ramped up its development programs, broadening and redefining its retail offer including a fresh flagship concept, in the City of Dreams at Macau.

Based in Hong Kong and part of the LVMH Group, DFS has outlets in 13 major global airports and 18 downtown Galleria locations internationally.

DFS Group president for merchandising and consumer marketing Sibylle Scherer told Inside Retail Hong Kong that, in general, the company’s response to the challenging environment has been to continue to raise the bar in terms of customer experience – “to keep doing what we were doing, but to do it better than ever before”.

In fact, 2016 was its biggest in terms of investment. “We opened a store in Siem Reap, near the temples of Angkor Wat; we opened a second wines-and-spirits duplex store in Singapore’s Changi International Airport; we vastly expanded our City of Dreams store; and we opened our first European store, right at the Rialto Bridge in the heart of Venice.

“Last year we opened in another terminal at Changi, and have focused on renovating our stores in places like Auckland and Sydney. So, through new stores, new concepts and new services, we have continued to find ways to surprise and delight our travelling customers.”

In recent years the company has been noticing what Scherer describes as “an evolution of the customer”.

“They are becoming more independently minded, wanting more choices across categories, seeking to add personalisation to luxury items to reflect their own style and, overall, pursuing more of a sense of experience in their shopping journey.

“Macau was one of the first places where we reacted to these trends. We saw that beauty remained such a resilient category, but at the same time our customers were seeking more playfulness, more interaction and experimentation with products, and a brighter, fresher environment than found in many traditional beauty stores,” says Scherer.

“In response, we opened our first T Galleria Beauty by DFS at Galaxy Macau in May 2015, and expanded the concept to our store in Causeway Bay a few months later.”

Upswing in sales

Scherer says DFS Group has begun to see an upswing in sales in both Macau and Hong Kong in recent months, and hopes it is a sign of more to come.

While the Hong Kong and Macau markets have traditionally drawn very different types of customer, she notes that is now changing.

“While Hong Kong has always been a destination for shoppers from all over the world, Macau was predominantly a destination for gamers. But the enclave has taken careful and thoughtful steps in recent years to move away from a dependency on gaming attractions, and has reinvented itself as a true destination for retailtainment, offering great restaurants, shows, attractions and – of course – shopping precincts.”

The expanded City of Dreams outlet is the largest department store in Macau, offering a fashion experience spread across two floors and featuring distinct “zones” including the largest beauty hall in southern China, the first DFS shoe salon, a dedicated men’s retail area, the first Timepieces & Whiskies concept, and an expanded jewellery offering.

“T Galleria by DFS, City of Dreams brings travellers the breadth of a luxury shopping mall with the personalised service of a high-end department store,” DFS Group chairman/CEO Philippe Schaus told guests at the opening. “This audacious take on the retail experience is the final piece in what has been a spectacular year of excitement for DFS and our customers. It has raised the bar in Macau, providing a curated and modern product selection across the major luxury categories.”

Meeting a vision

When setting out to enlarge the City of Dreams store by more than three times, DFS worked closely with the landlord, Melco Crown Entertainment, to ensure the result met its vision to establish City of Dreams as Macau’s pre-eminent destination for entertainment and retail enjoyment, says Scherer.

“We created a luxurious, contemporary and inviting atmosphere using elements of glass, marble and steel combined with warm wood accents. The setting was intended to be both dramatic and intimate, chic and classy, encouraging visitors to relax, unwind and indulge their taste for shopping and leisure. We aspired to create a space that resembles the type of department store that would shine on an international level, not just in Macau or Hong Kong.”

With the store stretching across 173,000sqft (about 16,000sqm), customers cannot immediately absorb the scale of T Galleria by DFS. “So there is a sense of curiosity,” says Scherer, “of ‘What am I going to see next – what’s on offer?’.

“When you arrive at the atrium, you will see the three levels of retail-and-cafe concept, with an 118ft-wide glass dome flooded with natural daylight. It’s a dramatic space and breathtaking.

“Then you might notice the expansive shoe salon, the largest in Hong Kong and Macau, filled with more than 50 men’s and women’s shoe brands across two floors; then perhaps the boutiques, with more than 40 fashion and accessories brands, including Dior, Fendi, Louis Vuitton, Miu Miu and Prada.

“Upstairs, men can enjoy a dedicated multi-branded, lifestyle area that mixes ready-to-wear, accessories, shoes, watches and grooming all in one space, including our first Timepieces & Whiskies boutique, set in a lofted library-style lounge where guests can relax and sample a cult-favourite single malt at the bar while trying on a classic watch by the fireplace.”

Continuing evolvement

The expansion took a year to complete, opening in February last year. Since then, DFS Group has continued to evolve the offer, adding boutiques and expanding categories, such as watches and jewellery, in response to customer feedback.

“We also added some edgier, younger brands, such as with the first All Saints Duty Free store in the greater China region. We pride ourselves on taking a ‘test and learn’ approach to all our stores, and will continue to make adjustments over time depending on our customers’ preferences and responses.”

Scherer says the space has also hosted events to offer “a continual sense of surprise and fun for our customers”. These have included a pop-up with Hong Kong designer Johanna Ho, celebrating her collaboration with Puma, the Longines Ambassador of Elegance Lin Chi-Ling at the opening of the watch brand’s boutique, and the Art of Personalisation event featuring global social influencers Mr Bags and Bag Snob along with British pop artist Boyarde.

While the new City of Dreams store is clearly the headline achievement of DFS Group during the past two years, it has not all been plain sailing for the company in Hong Kong-Macau.

In November, it completed its exit from Hong Kong International Airport, electing not to tender to renew its liquor and tobacco licence, and losing the perfume and cosmetics rights to Korean rival Shilla Duty Free and its JV partner Lagardere Travel Retail.

“At the time the company issued a statement saying the decision not to bid on liquor and tobacco was based on our unique understanding of the business environment … there were a number of reasons, including the high minimum conditions defined by the airport (against a context of volatile business and competition) and the Hong Kong Airport Authority’s policy of not allocating more than one concession to an individual company.”

An industry source told Inside Retail Hong Kong that, in its simplest form, DFS Group had not been able to make a profit on its business at the airport.

Part of DNA

That situation was partly because of declining visitor numbers from the mainland, and perhaps, as other commentators have suggested, because luxury is part of DFS Group’s DNA, given its parentage. Shilla and China Duty Free, which take over the alcohol and tobacco business, have committed to cheaper, “more competitive” prices, a wider range of items at different price points and even “try before you buy” services.

Lagardere Travel Retail CEO for greater China Eudes Fabre told the South China Morning Post of plans to “reset the price perception of Hong Kong airport”.

“It’s true that in the past the airport catered to the high end and luxury. Our challenge here is to have these very premium, high-end and one-off items while offering an entire range of products that appeal to any type of traveller at any price point.”

Scherer downplays the significance of pulling out of the airport, saying the downtown retail locations DFS Group has opened in Hong Kong and Macau are more appealing to travellers.

“Our airport strategy is just as important as ever. We opened our downtown locations as a way of extending our travelling customers’ experience with us from the moment of departure at an airport, when they are perhaps pressed for time or seeking something specific to their journey, to the actual destination, where they have more leisure time to browse products and enjoy bespoke customer services, all within the DFS world of beautiful stores with the best international and local brands, and, of course, our guarantee for authenticity and sales service.

“We do see that customers who shop with us at airports tend to also visit our T Gallerias, and vice versa.”

Fine liquors and luxury watches

A core feature of the DFS Group store at the City of Dreams is the fine liquors and luxury watches area, designed by Malherbe, a Paris-based design house with offices in Hong Kong and Shanghai..

As the photos in this feature show, the Timepieces & Whiskies space hosts a curated collection of fine watches and beverages in a relaxing, lounge-like lifestyle area designed to appeal to sophisticated Chinese consumers.

Malherbe business development director Stéphane Bihorel says the team designed a loft-like atmosphere “for this new consumer to come and discover, taste and linger”.

“Each watch brand is given a part of the floor-to-ceiling library, and is invited to add its own personal touch to the lifestyle ambiance,” he says.

Taking six months from concept boards to realisation, the fine liquors and luxury watches area is the basis of a new set of store concepts to be developed by DFS Group across various markets.