Mumbai/New Delhi: The world’s leading airport retail firm,Nuance Group AG, is exiting its duty-free shop at the Hyderabad international airport due to sluggish sales, said a senior executive of the group’s local arm and a top airport official.
The group is considering exiting its duty-free store at the Bangalore international airport as well, the senior executive said on condition of anonymity.
This will effectively put an end to Nuance Group (India) Pvt. Ltd, a joint venture (JV) it formed in 2007 with India’s second largest listed retailer Shopper’s Stop Ltd, which runs both the duty-free outlets.
“The current operators of the duty-free shop will exit from the Hyderabad facility,” said P. Sripathy, chief executive of GMR Hyderabad International Airport Ltd (GHIAL), which operates the Hyderabad airport.
Photo: K. Sudheer/Mint
The move was confirmed by two other executives who work for the JV partners, who did not want to be identified.
Faced with Switzerland-based Nuance’s impending exit, the GMR Group, which also operates the New Delhi international airport, is planning to float fresh tenders for a duty-free shop at the Hyderabad airport.
“We are going to issue by this week an expression of interest and request for proposals for this duty-free shop,” Sripathy said.
Nuance Group (India) does not reveal sales figures, but it had been expecting revenue of up to $240 million (around Rs1,070 crore) over seven years.
“But the business model went out of gear as the slowdown hit the airline industry. The parent company was not too happy about the footfalls at Hyderabad international airport…revenue kept falling while the inventory was going up,” the Nuance executive quoted above said.
“Pulling out from Hyderabad international airport may mean the end of the 50:50 owned joint venture formed between Shopper’s Stop and Nuance Group,” he added.
This is because the group is also considering exiting the JV at the Bangalore airport, as operating just one store is economically not feasible for it, he said.
Nuance is already talking to potential buyers for its stake in the JV, the executive said. “But it is too premature to comment about the same.”
B.S. Nagesh, vice-chairman and customer care associate at Shopper’s Stop, declined to comment.
An email sent to Ivo Favotto, executive vice-president, strategy and business development, at Nuance Group, on 23 March remained unanswered. Repeated efforts to reach him at his office did not yield any response.
Rolf Blaser, chief operating officer and India country head at Nuance Group, also declined to comment.
This is not the first time that a JV venture for duty-free shops at airports has fallen through. In November 2008, Pantaloon Retail (India) Ltd, which runs the Big Bazaar chain of retail stores, pulled out of a 50:50 JV with UK-based airport retailing firm Alpha Airports Group Plc after two years of operations at the New Delhi international airport.
Hyderabad airport had been looking at retail as a large part of its overall business, but sales have been lacklustre, according to New Delhi-based independent airport retail consultant Rakesh Chopra.
He said most of the flights from Hyderabad are from or headed to West Asia. This indicates many of the travellers are Indians working there, and they are likely not inclined to shop at the airport.
“Also, a large percentage of the travellers to the West Asian countries are from the Muslim community and they abstain from liquor, and liquor constitutes almost 70% of duty-free volume,” Chopra said.