Staff affected by closure of tobacco and liquor stores at Changi Airport could be redeployed or hired by new operator, says DFS

SINGAPORE — The 500 employees affected by DFS Group’s decision to close its tobacco and liquor stores at Changi Airport will be provided with “a number of options”. These include working for the new operator or being redeployed to other outlets in Singapore, the company said on Monday (Aug 26) in response to media queries. 

Clarifying some reports that its employees would lose their jobs when the lease for the stores runs out in June next year, a DFS spokesperson said: “As with all airport concession handovers, a number of options are available to staff. These include working with the new operator depending on their aspirations and needs, and working with other operators in the airport community.”

Those affected could also be redeployed to its luxury concessions at Changi Airport, its T Galleria store on Scotts Road or its store at Singapore Cruise Centre, all of which are not affected by the move, the spokesperson added.

Commenting on the news, analysts interviewed by TODAY noted the challenges of operating in the duty-free space in Singapore. In spite of this, having a presence at Changi Airport remains attractive to other operators, they added.

DFS Group, which is based in Hong Kong, announced earlier that it will not put in a bid to keep its duty-free liquor and tobacco concession at the airport, where it has been operating since 1980.

Its chairman and chief executive officer Ed Brennan said that its decision not to bid was based on its “unique understanding of the business environment” as the current operator of the concession in the airport. 

“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,” he added.

Travel retail publication The Moodie Davitt Report named industry giants Lotte Duty Free, The Shilla Duty Free and Gebr Heinemann among those that have put in bids to operate the concession.

In response to TODAY’s queries, Heinemann Asia Pacific's CEO Marvin von Plato said: “We already operate liquor and tobacco concessions across numerous airports around the world, and the liquor and tobacco concession at Changi Airport — which is one of the top airports in the region — would be a natural next step for Gebr Heinemann on the way to expanding even further in the Asia-Pacific region.”

It is understood that the new operator will be announced in November.

The DFS spokesperson reiterated that the company will work closely with the new operator “to ensure a smooth handover”.

“Regardless of our decision to withdraw from the liquor and tobacco concession at Changi, we remain fully committed to our future in Singapore, where we have operated for nearly 40 years.” 

Speaking to TODAY, Mr Samuel Tan, course manager at Temasek Polytechnic’s diploma course in retail management, said that there could be two possible reasons behind DFS’ move: “Huge capital expenditures” during the contract term, and extra rental charges which are calculated based on terms and conditions of the contract.

Based on the sales trend which DFS has observed in its decades of operation at Changi Airport, the company may have considered it a less profitable option to continue, Mr Tan said.

“There could be high expectations to deliver during the contracted period. The service level, the shop design and managing customer expectations are some key targets that the duty-free operators need to achieve,” he added.

Dr Kapil Tuli from the Singapore Management University’s Retail Centre of Excellence noted that other operators are still game to bid for the space at Changi Airport even if they may have different objectives.

“For some firms, operating in a specific retail location could be about making operating profits from that particular location. For other firms, being (at) a specific location is not just about profits, it also about creating brand awareness and signalling brand quality,” he said.

Mr David Lee, senior business consultant and lecturer at the Singapore Institute of Retail Studies, said that DFS’ move could be strategic, especially when it had on July 30 launched an e-commerce platform, iShopChangiWines.com, offering premium wines, champagnes and sakes at duty and Goods and Services Tax (GST)-absorbed prices.

Mr Lee said: “In today’s digital economy, digitisation is integral to the innovation-driven business environment and customer experience. DFS has done a brilliant move to go online while having a physical presence at T Galleria and Singapore Cruise Centre.”

In response to TODAY’s queries, the Changi Airport Group said that the iShopChangiWines.com platform will continue to operate until further notice.