SINGAPORE - After 38 years of selling liquor and tobacco at Changi Airport, the DFS Group will soon be pulling out.
Its duty-free stores will close next June, when its lease expires, to make way for a new player.
The luxury travel retailer, Changi's biggest and oldest tenant, has confirmed that it did not bid for a new liquor and tobacco concession. The tender exercise closed on Monday (Aug 26).
A DFS spokesman told The Straits Times on Tuesday that about 500 people are directly employed to service DFS' liquor and tobacco concession operations at Changi Airport.
She said DFS Group will work closely with the new operator, expected to be announced in November, to ensure a smooth handover.
The spokesman said the staff had the option of working with the new operator or with other operators in the airport community. Some may also be offered deployment at other DFS locations in Singapore.
"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," she said.
The group's luxury concessions at Changi; T Galleria by DFS, Singapore at Scotts Road; and its Singapore Cruise Centre business will operate as usual.
In a statement issued to the media, DFS Group chairman and chief executive officer Ed Brennan said: "Our decision not to bid was based on our unique understanding of the business environment as the current operator of this concession at Changi.
"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."
DFS manages 18 liquor and tobacco stores at the airport, occupying over 8,000 sq m of retail space across the four terminals.
Retail experts said DFS Group's decision to pull out was likely impacted by Singapore's tighter rules on liquor consumption, more travellers shopping online, and new competition brought in by Jewel Changi Airport.
Since April 1, the alcohol duty-free concession has been cut from three litres to two litres.
Adjunct Associate Professor Lynda Wee, from Nanyang Technological University's Nanyang Business School, said travel retail has changed over time.
"Forty years ago, travel retail gave people the option of buying exclusive items they couldn't get hold of in their home country. Today, with online retail, that advantage has been eroded," she said.
Dr Wee said DFS will also have to compete for tourist dollars with the new Jewel Changi Airport. "Tourists will be attracted to Jewel Changi. And they have limited luggage space and weight. So if they have filled their quota after shopping at Jewel Changi, will they still buy at DFS?"
This is the second international airport from which the group has pulled its duty-free stores in the last two years. DFS Group exited Hong Kong International Airport in 2017.
Despite these exits, the group has done well in the last year. Its majority owner LVMH Moet Hennessy Louis Vuitton reported "solid progress" in the first half of 2019.
DFS is part of LVMH's Selective Retailing business group, which achieved organic revenue growth of 8 per cent in the first half of this year compared with the same period last year.
The Straits Times understands that three firms have submitted bids for the liquor and tobacco concession at Changi Airport. They are The Shilla Duty Free of South Korea, which operates the perfume and cosmetics stores at Changi, another Korean firm, Lotte Duty Free, and Gebr Heinemann of Germany.
This is not the first big retail shift that the airport has experienced. In 2014, The Shilla Duty Free ousted then incumbent Nuance Watson and won the bid to run the airport's 19 perfume and cosmetic stores.