Duty-free shops at Suvarnabhumi Airport are showcased on July 29, the day six airlines conducted their inaugural flights to the airport.

They will be charged up to 20 per cent of their sales per month by King Power for leases to operate their outlets. As a result, they expect a marked reduction in profits.

This is proving a headache to retailers of affordably priced products that are subject to government price controls, as they cannot raise their prices to compensate as the luxury-brand shops with high profit margins can.

Of the 20 per cent, 5 per cent will go to King Power for management fees and the rest to Airports of Thailand Plc (AOT).

Airport director Somchai Sawasdeepon said King Power had been awarded the right to manage 20,000 square metres of retail space with the guarantee that it pays AOT a minimum of Bt1.341 billion per annum. King Power also has to ensure that items sold in the retail area - which does not include duty-free - are not priced more than 25 per cent above prices quoted outside the airport.

Kannika Chinprasithchai, the marketing manager for Black Canyon (Thailand) Co Ltd, operator of Black Canyon coffee

houses and restaurants, said

the company had opened three 100-square-metre restaurants

at the new airport under

different brands, including Black Canyon.

However, she admitted that

the operational costs at Suvarna-bhumi outlets were many times higher than in normal stores.

"We are reviewing the product mix and pricing strategy for our Suvarnabhumi outlets to ensure our restaurants survive amid the high-cost structure," said Kannika, adding that all products and packages would be of premium quality in order to justify the higher prices.

"It will be a challenge to develop a menu that will suit foreign travellers visiting outlets at the international terminal and Thai travellers at the domestic terminal."

She said it would be quite difficult to operate Black Canyon restaurants at the new airport, as everything was based on a high-cost structure.

"What we have done is to choose a product mix that meets the requirements of specific consumers at the airport while keeping an eye on our costs and expenses," she said.

"We are interested in this airport project as it is an international project and will help us explore our reputation at an international level. It also advertises our brand to an international audience."

Executives of Jim Thompson, a high-end silk-producer and distributor, said that although the company planned to open a huge shop at Suvarnabhumi, it did not expect to have a big profit margin because its gross sales would have to be shared roughly half and half with the airport franchise-owner.

Despite this problem, Jim Thompson felt the need to trade at the airport in order to gain maximum exposure to tourists. Suvarnabhumi will be able to handle 45 million passengers in its first year of operation.

Arporn Supmonchai, head of marketing at DHC (Thailand) Co Ltd, said the company would open its first Asian airport outlet at Suvarnabhumi. The three-square-metre corner outlet will sell 51 facial and skin-care products in the tax-free area of the domestic terminal.

"The opening of our outlet at Suvarnabhumi goes along with our strategy to expand our customer base through different retail channels," said Arporn, adding that convenience-sized DHC products had been available at premium supermarkets such as Tops, Isetan and UFM Fuji for the past two months.

DHC's latest retail outlet will be officially opened at King Power's duty-free complex in Soi Rangnam on Friday.

"We are generally perceived by consumers as an Asian brand. With our new outlet at Suvarnabhumi, we want to create an image of DHC as an international brand," said Arporn.

DHC's outlet at Suvarnabhumi is expected to generate sales of more than Bt30 million a year.

Kwanchai Rungfapaisarn

The Nation