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RETAIL IN THE USARETAIL IN THE USA

The retail culture in the United States is unlike that of The retail culture in the United States is unlike that of any other country any other country

Retail is the secondRetail is the second--largest industry in the U.S. by largest industry in the U.S. by number of businesses and number of employees number of businesses and number of employees

The U.S. leads the rest of the world in terms of the The U.S. leads the rest of the world in terms of the proportion of annual per capita income allocated to the proportion of annual per capita income allocated to the purchase of nonpurchase of non--staple goods. staple goods.

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DUTY FREE IN USADUTY FREE IN USA

One of the less developed duty free regions

Little stores and sometimes multiple locations

Basic product mix

Lack of luxury

No excitement offered to passengers

Very low presence of U.S. customers

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WHY?WHY?

Lack of savings as compared to local marketLack of savings as compared to local market

Duty Free products are widely available in local marketDuty Free products are widely available in local market

Unfriendly operations requirements:Unfriendly operations requirements:

A) Gate delivery systemA) Gate delivery system

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WHY?WHY?

B) AIRPORT INFRASTRUCTUREB) AIRPORT INFRASTRUCTURE

Most U.S. airports allocate limited space for duty free operatioMost U.S. airports allocate limited space for duty free operationsns

Old, ugly , small and basic stores Old, ugly , small and basic stores

No arrival duty free systemNo arrival duty free system

Combination of airCombination of air--side and landside and land--side shopsside shops

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WHY ?WHY ?

C) AIRPORT DUTY FREE OPERATORS C) AIRPORT DUTY FREE OPERATORS

Limited investment capacity due to exorbitant occupancy fees Limited investment capacity due to exorbitant occupancy fees and operating expensesand operating expensesLack of visionLack of vision

D) STAFFD) STAFF

Difficult working conditions in U.S. airports create a great Difficult working conditions in U.S. airports create a great challenge in terms of recruiting the ideal sales staffchallenge in terms of recruiting the ideal sales staff

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DFADFA’’S ACTION PLANS ACTION PLAN

In 2008, DFA structured a plan to aggressively transform the status of the business in the USA. Re think product mix

Upscale IT

Sales staff

New store design and better locations with more space

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THE CRISISTHE CRISIS

After the crisis exploded in September, DFA decided to:

Continue as much as possible with the original action plan structured to increase the duty free business

Implement a tailor made plan to survive the crisis

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CRISIS ACTION PLANCRISIS ACTION PLAN

Operational budget reduced 40% by:1. Headcount reduction of 25%2. Salary reduction of 15%3. Operational rationalization4. Logistics rationalization

Aggressive promotions through all categories

In-store animations

Out-of-store animations

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CRISIS ACTION PLANCRISIS ACTION PLAN

Cross promotions

Strong GWP and Spiff program

Personal shopper program in some VIP lounges

High focus in balancing existing stocks

Very cautious purchasing

Introduction of new brands

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NEW PRODUCT MIXNEW PRODUCT MIX

In all airports and stores we:

Balanced space in each store to correctly display and maximize all categories

Balanced sub-categories and brands within each category

Create the necessary conditions to allow a product / passenger interaction.

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NEW PRODUCT MIXNEW PRODUCT MIX

Defined brands and SKU’s based on:

1. Pax nationalities going through the different stores

2. Space available at each store

3. Economic profile of pax

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IT UPDATEIT UPDATE

A) LOGISTICSAll Divisional and Regional warehouses are fully IT operational.Receiving time was reduced threefold.Accuracy in receiving, storing, picking, and supplying stores improved dramatically.Auto replenishment from Divisional to Regional warehouses and to stores is fully implemented. By 2010 DFA will be running with EDI

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IT UP DATEIT UP DATE

B) RETAIL : New POS

Reduced transaction time by halfUser friendly, reducing store level training time and mistakesReal time sales information by storeFlexibility to implement tailor-made promotions by store: loyalty programs, publicity, passenger purchase history, etc.Capacity to analyze promotions, launches, etc. by store

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SALES STAFFSALES STAFF

Restructure of organizational chart in all airports based upon:

Empowerment to management

Terminals activity as a key staffing guide

Upscale dress code

Increase training in product knowledge

Sales strategy training to all staff

Visual merchandizing team

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SALES STAFFSALES STAFF

With this we achieved:

Motivated staff

Headcount optimization

Improved operational capacity

Sales staff more oriented to greed and serve a customer

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SALES STAFFSALES STAFF

We will implement a new commission program focused on:

Rewarding individual productivity

Balancing sell out

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NEW STORESNEW STORES

Have bigger storesImplement a new design element that should:

1. Create a luxury environment 2. Surprise the passengers3. Visually guide the passenger through the different

categories4. Easy brand identification and product interaction5. Create a great travel retail experience

One of the key elements to increase the duty free business was to:

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NEW STORESNEW STORES

All of these new concepts must :

Increase penetration rates

Increase average tickets

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NEW STORESNEW STORES

DFA was able to negotiate bigger spaces and build:

2 stores at Detroit North Terminal

2 stores at Boston

1 store at JFK / T7

1 store at JFK / T3

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NEW STORESNEW STORES

1 store at Washington Dulles, Terminal C

MIAMI

A) 2 at South Terminal

B) 3 at North Terminal

JFK JFK -- T7T7

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WASHINGTONWASHINGTON--DULLES DULLES -- CC

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JFK JFK –– T3T3

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BOSTON CBOSTON C

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MIAMIMIAMI

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RESULTSRESULTS

With an investment in the ACTION PLAN of more than USD $ 20 MM during 2008 / 2009, DFA was able to:

Reduce the effects of the economic crisis.

Create the necessary conditions to achieve a fast and solid growth.

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RESULTSRESULTS

For the first time in the East Coast, DFA brought a sense of luxury and shopping experience to the airports environment.

Generate a long term commitment with the Duty Free Industry.

Some airports are already showing the benefits: Miami is 15% up against last year which was the highest ever.

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