Duty free retailing: Is the transtasman bubble enough to keep airport retailers afloat?

The Loop Duty Free is pleased to welcome travellers back to its international terminal stores. Photo / Supplied

Airports around the country have been waiting for the two-way transtasman bubble to open up for months. Now that inbound and outbound travel between Australia and New Zealand is permitted, is it enough to put retailers' accounts back in the black?

Auckland Airport's international terminal is said to have its hum back, with emotions high among travellers reuniting with family and friends after more than a year of closed borders.

Tom Bryne, general manager of The Loop Duty Free at Auckland Airport, said trading at the Irish retail chain's three outlets in the international terminal was off to a good start this week following the bubble opening up on Monday.

While sales so far only accounted for 20-30 per cent of regular earnings, Bryne said every transaction was helpful and a far cry from virtually no sales recorded last year.

"It's been a very dark year for a lot of businesses and a lot of people and we are certainly one of those, so we're absolutely delighted that the bubble is in operation," Bryne told the Herald on Thursday.

Australian travellers alone were not enough to provide the sales revenue The Loop is used to, he said. "The transtasman movement between Australians and New Zealanders helps us a lot, but it certainly doesn't get us out of the woods ... there's still a big gap there, a lot of work to do before we can say we are in a good place."

A large chunk of The Loop's approximately 150 retail sales staff that typically worked in the international outlets were last year redeployed to its outlets in the domestic terminal and its pop-up in Sylvia Park shopping mall.

It was a happy time for staff to return to the international terminal this week, said Bryne.

As well as Aussie arrivals, outbound Kiwi travellers were also dipping into their pockets this week. This weekend would be the true test to analyse the level of returned spend, he said.

"The first outbound and inbound passengers are looking forward to meeting up with family and friends and certainly they have been stopping in duty free either for gifting opportunities or purchasing for themselves."

Tom Bryne, general manager of The Loop Duty Free. Photo / Supplied

Auckland Airport says 8000 transtasman travellers have been through its international terminal in the first three days of the travel bubble. Of this, over 5000 people have visited The Loop sites, Bryne said.

Alcohol had proven to be the hot ticket item this week as Kiwis moved to stock up their at-home liquor cabinets, Bryne told the Herald.

Bryne said The Loop expected its sales to trend upwards in coming weeks as more people started travelling between New Zealand and Australia.

"The way we look at it is there is going to be a couple of phases to this bubble. The first phase is those travellers who want to reunite with family and friends - those people are the first to travel, a month out you'll have business people who are travelling as well and I think the third phase will be the more tourist passenger profile when people get used to the bubble and comfortable with the safety measures that are in place - that's when we'll see more of the tourist market back."

Each of those passenger profiles had a different spending profile, he said.

"We are seeing positive spend, but it will continue to build as passenger numbers increase.

"What we're seeing in the first few days is this pent-up need for duty free, everybody is looking for their favourite brand be it Toblerone or Bombays."

The Loop could not share any specific sales figures but said the level of spend it had experienced until now had been expected.

A spokeswoman for Christchurch Airport said passengers bound for Australia were "certainly taking advantage of duty free shopping opportunities".

Alcohol sales have been big business for The Loop since the transtasman bubble began. Photo / Grant Bradley

Australia was typically a big market for travel retail by transaction volumes, however, travellers from Asia were the big spenders by value, Bryne said.

Domestic vs international spending

Retail in the domestic terminal compared to the international terminal are two very different markets, Bryne said.

With passengers needing to check in for their flights three hours in advance it allowed
more time for browsing and shopping as opposed to what is typically a short journey through the domestic terminal ahead of a flight.

With fewer people travelling and therefore shorter passenger processing times, travellers now had more time to shop than they may have had previously pre-pandemic.

The Loop had very little presence in the domestic terminal prior to the onset of the coronavirus pandemic. However, when its international terminal business came to a halt it pivoted and opened three small outlets in the domestic terminal.

Its domestic terminal retail operations make up between 5-10 per cent of pre-Covid earnings.

Bryne said it was an easy pivot for The Loop to move into the domestic terminal and the retailer continued to experience growth within the domestic channel.

The Loop operates seven outlets in Auckland Airport, including its e-commerce channel through the airport's The Mall offering. It began trading in New Zealand in 2015.