Undaunted by EU ban, SAS opens duty-free stores
One newcomer to Okzcie's duty-free scene is Scandinavian company SAS Trading, which at the beginning of August signed a four-year agreement with state-owned airport company Polskie Porty Lotnicze (PPL) to open three new duty-free stores. SAS in early September will begin operating a perfume and cosmetics outlet, a liquor store and a clothing outlet, said Robert Hernadi, development and marketing director with SAS Trading.
SAS is the ninth company with which PPL in recent months has signed a contract to operate retail stores in Okzcie, said Anna JoĽwik, spokeswoman for PPL. All of the other operators, eight of which already run shops in the airport, also signed four-year contracts. While duty-free shopping will be banned once Poland joins the EU, other retailers, PPL and SAS said last week that they will continue to operate their stores in the near-term because there is still a good three to five years of tax-free shopping left here.
"We are still not in the European Union," JoĽwik said. She added that while many officials expect Poland to join the union in 2003, it is a best-case scenario and actual accession may not happen until 2005 or later.
SAS has been trying to expand its presence in duty-free shopping to airports outside of the EU in anticipation of the ban in much of Western Europe, Hernadi said. Initially, PPL had agreed to give SAS Trading a concession to operate a retail network called Warsaw Duty Free at Okzcie airport. But that plan was scuttled after management changes at PPL, he said.
The current plan, although scaled back, gives SAS Trading exclusivity in selling perfumes and cosmetics at the airport after Sept. 1.
SAS Trading expects to invest $2 million-$3 million into its new airport shops, Hernadi said. In its first year of operation, the company is forecasting revenue of about $10 million, he said. "But I wouldn't be surprised if it ended up at $12 million," he added, noting that passenger traffic at Okzcie has been growing by 14% annually.
Hernadi acknowledged that Poland will eventually join the EU and that the resulting ban will eventually cut into sales. According to JoĽwik, passenger traffic to or from the EU accounts for 63.3% of total traffic through Okzcie.
"Obviously it reduces sales in proportion to the traffic," he said.
According to JoĽwik of PPL, three companies that currently operate duty-free shops sell cosmetics - Gdynia-based Baltona, Conin and Keraniss. But while JoĽwik would not say if the companies were upset by SAS' newfound exclusivity rights, she mentioned that the firms knew of the agreement when they signed their new contracts.
But SAS Trading will also face restrictions because it will not be able to sell Polish spirits. Its liquor store will be limited to imported brands, such as Cognac or Champagne.
Officials at trading company Baltona were unavailable for comment, and Conin President Edward Maksymowicz declined to comment on SAS's concession. Cosmetic sales reportedly account for about 25% of Conin's turnover. But Maria Sikorska, president of firm Keraniss, which sells a small amount of cosmetics at it's duty free store in Okzcie, said: "It would be better if there was not" such a restriction on what her firm could sell.
Sikorska also said that her firm is not worried about the effect Poland's accession to the EU will have on duty-free shopping. She also said that Keraniss intends to keep its Okzcie shops open even after the ban, although prices will then include taxes.
In 1998, total revenue at Okzcie Airport came to zł. 123 million ($35 million), out of which $4.8 million was in retail, JoĽwik said. But this amount remains small compared to other airports in Europe, such as in Scandinavia, where retail can comprise up to 40% of revenue. However, this can include other services, such as parking and banking.
SAS is the ninth company with which PPL in recent months has signed a contract to operate retail stores in Okzcie, said Anna JoĽwik, spokeswoman for PPL. All of the other operators, eight of which already run shops in the airport, also signed four-year contracts. While duty-free shopping will be banned once Poland joins the EU, other retailers, PPL and SAS said last week that they will continue to operate their stores in the near-term because there is still a good three to five years of tax-free shopping left here.
"We are still not in the European Union," JoĽwik said. She added that while many officials expect Poland to join the union in 2003, it is a best-case scenario and actual accession may not happen until 2005 or later.
SAS has been trying to expand its presence in duty-free shopping to airports outside of the EU in anticipation of the ban in much of Western Europe, Hernadi said. Initially, PPL had agreed to give SAS Trading a concession to operate a retail network called Warsaw Duty Free at Okzcie airport. But that plan was scuttled after management changes at PPL, he said.
The current plan, although scaled back, gives SAS Trading exclusivity in selling perfumes and cosmetics at the airport after Sept. 1.
SAS Trading expects to invest $2 million-$3 million into its new airport shops, Hernadi said. In its first year of operation, the company is forecasting revenue of about $10 million, he said. "But I wouldn't be surprised if it ended up at $12 million," he added, noting that passenger traffic at Okzcie has been growing by 14% annually.
Hernadi acknowledged that Poland will eventually join the EU and that the resulting ban will eventually cut into sales. According to JoĽwik, passenger traffic to or from the EU accounts for 63.3% of total traffic through Okzcie.
"Obviously it reduces sales in proportion to the traffic," he said.
According to JoĽwik of PPL, three companies that currently operate duty-free shops sell cosmetics - Gdynia-based Baltona, Conin and Keraniss. But while JoĽwik would not say if the companies were upset by SAS' newfound exclusivity rights, she mentioned that the firms knew of the agreement when they signed their new contracts.
But SAS Trading will also face restrictions because it will not be able to sell Polish spirits. Its liquor store will be limited to imported brands, such as Cognac or Champagne.
Officials at trading company Baltona were unavailable for comment, and Conin President Edward Maksymowicz declined to comment on SAS's concession. Cosmetic sales reportedly account for about 25% of Conin's turnover. But Maria Sikorska, president of firm Keraniss, which sells a small amount of cosmetics at it's duty free store in Okzcie, said: "It would be better if there was not" such a restriction on what her firm could sell.
Sikorska also said that her firm is not worried about the effect Poland's accession to the EU will have on duty-free shopping. She also said that Keraniss intends to keep its Okzcie shops open even after the ban, although prices will then include taxes.
In 1998, total revenue at Okzcie Airport came to zł. 123 million ($35 million), out of which $4.8 million was in retail, JoĽwik said. But this amount remains small compared to other airports in Europe, such as in Scandinavia, where retail can comprise up to 40% of revenue. However, this can include other services, such as parking and banking.
