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Exclusive: Dubai Duty Free’s Colm McLoughlin on building a successful business

Exclusive: Dubai Duty Free’s Colm McLoughlin on building a successful business

Having been in his post since 1984, executive vice chairman Colm McLoughlin talks about the leadership and innovation necessary to create an efficient business

You have said previously that over the last 30 years Dubai Duty Free sales have grown 9,900 per cent, meaning you have “turned most passengers into shoppers”. What growth rate are you expecting in the future?

“We are predicting that by 2018, we will have sales of $3bn. We are expecting our sales this year to be $2bn, which makes Dubai Duty Free the single largest such operation as a single airport anywhere in the world.

“In terms of penetration or the number of departing passengers we sell something to, it is around 45 per cent. If you look at Heathrow, Gatwick, Singapore, Hong Kong, Charles de Gaulle or wherever the general trend would be 18 to 20 per cent. The other measuring stick, of course, is the level of purchase we sell to everybody. Going back to 1984, we sold an average of $5 to every departing passenger. In 2015, it is about $45.”

How much of a boost will Expo 2020 provide for your business?

“We know that it will create 260,000 jobs in Dubai. The more people that live and work here, the more business we will do. We have read that there will be footfall that year of 20 million people. Previous expos have left a real legacy with the products that were launched, the inventions that came to the world. It will be huge.”

On the flipside of that, are you at all worried about the weak financial climate across the globe with little sign of economic growth anywhere in the world – and how that might start to put a dent in your profits?

“Dubai has in the past recovered pretty quickly from these things. Crises have been coming forever. If you look back at 2007 to 2009 in Dubai, there were adjustments in the real estate business and we had financial problems all around the world but the city came out of it very well. It continued to develop and to build. I recall His Highness Sheikh Mohammed saying ‘build it and they will come’ and he was right.

“Crises will continue around the world for as long as we live. There’s been no year when our business hasn’t increased and traffic through the airport hasn’t increased. The traffic through the airport in 1984 was three million people. Last year, it was 72 million people. It might break 80 million this year. We are getting something right.”

Which nationality would you say spends the most in duty free and which spends the least – and what are the factors driving that?

“It changes, 10 years ago the Russian traffic through the airport was very important. Now there is the problem of currency fluctuation. We estimate this year that the lack of Russian spend is going to mean we will drop Dhs 160m in sales that we would otherwise have had. Now that has been picked up by Asia. To take one example, the Chinese traffic through the airport this year is up 5 per cent. African traffic has been growing too. The trends change all of the time and we have to change with them.”

And what would the lifting of sanctions in Iran mean for DDF, would it deliver a financial shot in the arm with more Iranians travelling through Dubai?

“It would be fantastic for Dubai Duty Free and the region. I’ve read it could be worth $80bn.”

Already, there is a huge Indian diaspora in Dubai. With the recent visit of the Indian Prime Minister Narendra Modi and improved relations between India and the United Arab Emirates are you forecasting even bigger levels of spending by Indian nationals coming in and out of the UAE?

“The visit was very positive but we’ve had a long term relationship with Indian customers and we have 800 Indians working for us. And, of course, our business into India is substantial and will continue to grow. It’s very important.”

You are in charge of what is in effect an army of 6,000 employees at DDF. How many of those people would you estimate that you have met during your 32 years at the organisation?

“I’ve actually met all of the staff because when we recruit new people I always go to the training programmes and welcome the new groups. I go to the stores a lot and I meet many of them when I am walking around.”

How would you describe your management style then?

“We keep our operation simple and people are involved in decisions. We jokingly call our weekly meeting of the senior people ‘the dream team’ and a lot of information flows through that. It’s corny to say you have an open-door policy but I think that it’s correct. I do attend many things including the sports and social club for our staff and I always give some input into the monthly staff newsletter.

“We also have a system whereby we reward our staff with ‘employee of the month’ and I always do those presentations, provided I am here. So I feel close to the staff even though there are 6,000 of them.”

Your organisation owns more than 700 employee apartments, many plots of land at Silicon Oasis, the Irish Village, Dubai Tennis Stadium and the Jumeirah Creekside Hotel. Do you have any plans to diversify your portfolio even further in the future?

“We do plan to develop the sites we have at Silicon Oasis at some stage but we haven’t decided how yet. It may be staff accommodation, apartments to let or a hotel. We are looking at the possibility, for example, of extending the Irish Village in the future because the city of Dubai has grown outwards and outwards.”

Given the success you have had in Dubai, are you not tempted to expand internationally and buy duty free operations in other parts of the world in order to replicate the same model in alternative markets?

“The quick answer is ‘no’. We have always been so busy in terms of keeping pace with what’s happening in Dubai. It’s very far down our list of priorities, it’s not seriously being considered.”

And you have the new airport coming in Dubai. I guess that will be a game-changer?

“That is going to be huge. If we look forward to 2021, Dubai Duty Free will have 80,000 square metres of retail space there. In terms of sales figures, we are probably talking about somewhere in the region of $4bn. We are going to be pretty busy here.”

I understand that tickets for the tennis events are always oversubscribed. Are there plans to expand the stadium or build a new large arena in order to optimise attendance levels?

“Our centre court holds 5,000 people and the time there is pressure on that is the final and semi-finals. It also depends who is playing. We have plans in our pocket to increase the seating by 2,000 but it’s not an immediate thing, we are not going to do it yet. We did talk about building a new facility at one stage but we have decided to develop what we have. As far as we are concerned, that’s our home.”

Changing topic completely, tourists coming into Dubai are often confused about the laws relating to purchasing alcohol at the airport without having a licence. It seems to be a real grey area. Can you clarify the situation?

“Yes, it is legal to purchase alcohol. There are, like any country in the world, certain limitations. It is very liberal. More than 40 per cent of the alcohol business we do is done in our duty free arrivals.”

And there’s no problem with taking it into the city without a licence?

“There is no problem. You read things in the newspaper sometimes but that usually relates to the misuse of alcohol. We are selling the alcohol at the airport with the approval of the ruler and the approval of the government so it’s legal to take it in.”

Would you say the luggage allowances of certain airlines restricts your business because people are unable to buy as much as they would like to in duty free – for fear of their bags being overweight?

“We gave out 296 refunds in the last month because when people got to the gate, they realised they were overweight. That’s an irritant. We have to educate the customers about the new rules. And we do meet with the airlines to discuss the issue.”

What are you expecting to be the big hits this year in terms of new product sales, what are the industry trends and consumer wants likely to be?

“We are selling drones right now. But we find that if you take perfumes and cosmetics, together they account for 27 per cent of our business. Several years ago, cameras were a big part of the business. It’s not so big anymore because of smartphones. We do questionnaires and surveys to find out what sort of product people expect. And we have a research team within our purchasing department.”

I understand that people can actually buy online from DDF and pick it up at the airport now. How is that initiative working out for you? And has disruptive technology affected your business at all in terms of online shopping with global websites like eBay and local forums like Dubizzle becoming a competitor to duty free?

“Life is full of competition. Other nearby airports are also competition and it’s good for the business because it has encouraged suppliers to take more notice of this region. Online is growing everywhere and we started a tick and collect service in January of last year.

“We haven’t got it right yet is the honest answer because our customers have to pay at arrivals or departures. We are now working on a system that will allow passengers to pay when they buy and then collect whenever they like. But we do have 5,000 items available online. Since January, we have done Dhs 35m of business online. We have to tweak the system and make it even better though.”

Would your personal career journey be possible today when everything is so professionalised and every senior executive is expected to have qualifications at least to MBA, if not Ph.D., level? I read that you intended to be a dentist before going on to work at Woolworths in London and then returning to your native Ireland to work at Shannon Airport Duty Free – before the Dubai job.

“I think it would be possible if somebody works honestly, works hard and doesn’t lose touch with reality. But I do think the freedom and support I got in Dubai over 32 years would be difficult to get elsewhere.”

What are your thoughts on the recent hike in fuel prices here and the discussions around the introduction of value added tax – is there a risk that Dubai and the United Arab Emirates might price themselves out of the market in the years to come with further stealth taxes?

“I have no problem with what has happened in terms of fuel costs. We are all aware that Dubai has become more expensive than it was but incomes have also increased. It is still a very desirable place to live. If I owned Dubai, I would have had VAT years ago. I see nothing wrong with it.

“Why don’t countries around the world get rid of all the other taxation systems and just have one system like value added tax? It would simplify the whole thing. From a duty free point of view, if VAT is operational in a country it actually makes the duty free more desirable. So the quicker it happens the better.”

You often praise the leadership and backing of His Highness Sheikh Ahmed bin Saeed Al Maktoum, president of the Civil Aviation Authority and chairman of DDF. How closely do you work with him and how much does he get involved when it comes to crafting the vision and strategy for the organisation?

“I meet with His Highness every week if he is here and I am here. If I need to get an approval from him, I ask and there is no procrastination. It is very quick. He also tells me what he would like. The working relationship is very good. He works very hard but has time for everybody. Personally, I learn from him all of the time.”

Finally, what can the visitor to Dubai expect to find here five years from now – how much will the city change?

“They will find more parks, a better spread of three-star hotels, an extension of a very successful metro, new suburban cities and a bigger population. I think the desert will be developed more and more too.”

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