DFS puts focus on Mainland visitors

By Andrew Gomes
Advertiser Staff Writer

DFS-Hawai'i is undertaking a campaign to target U.S. and Canadian visitors as the travel retailer traditionally focused on Japanese tourists tries another strategy to revive sales more than six months after Sept. 11.

The company, which sells duty-free and regular retail merchandise at several stores statewide, yesterday began a U.S. visitor promotion, the first such campaign in the company's history.

To also attract more Westbound travelers, DFS-Hawai'i is revamping some of the merchandise at Waikiki Walk, the year-old entertainment-oriented addition to its main Galleria shopping complex on Kalakaua and Royal Hawaiian avenues.

"We're adjusting," said Sharon Weiner, DFS Pacific group vice president for business development, public and government relations. "It's a sign of the times."

Jon-Eric Greene, senior vice president of retail services for local real estate firm Colliers Monroe Friedlander, said DFS-Hawai'i and other local resort retailers have been forced to pay more attention to Westbound customers.

"Now that the bigger spenders aren't there, you have to concentrate on who's there," he said.

A unit of San Francisco-based DFS Group Ltd., DFS-Hawai'i was one of the hardest hit among the state's visitor-based retailers hammered by sales declines following the Sept. 11 terrorist attacks that temporarily destabilized Island tourism.

Because DFS-Hawai'i had relied primarily on Japanese visitors, who have yet to return to pre-Sept. 11 arrival levels in the state, company sales have not rebounded well.

The number of Japanese visitors has been down 20 percent to 30 percent for most of this year, compared with the same period last year, according to state data.

Weiner said DFS sales on O'ahu have only partially recovered from the 50 percent drop that lasted through January, and are still down 25 percent to 30 percent.

"Japanese visitor numbers are still far from normal, and until Hawai'i has more success bringing back the Japanese market, we have to turn to domestic visitors to replace at least some of those lost sales," she said.

Mainland visitors generally spend half of what Japanese visitors spend, though since Sept. 11 the Japanese visitors who are coming to Hawai'i tend to be more bargain-conscious than ever, industry experts said.

To better serve Westbound visitors, DFS recently began selling T-shirts in a location formerly occupied by jewelry near Waikiki Walk's street-front aquarium.

Also, golf equipment is being moved from a second-level space in the complex to a space in the connected main Galleria building more frequented by Japanese shoppers.

Other options for changing or rearranging Waikiki Walk merchandise concepts are being discussed, Weiner said.

In addition to merchandise adjustments, DFS-Hawai'i is attempting to achieve more customer balance through promotions.

The monthlong domestic promotion that began yesterday could be extended past April. It offers U.S. visitors 10 percent off select merchandise at DFS stores in Waikiki, including Hilton Hawaiian Village, and the Waikoloa Beach Resort.

An Eastbound promotion was also implemented yesterday, offering customers from Japan a $50 certificate for duty-free merchandise at the same three stores, plus DFS-Hawai'i's Honolulu International Airport location.

In new cost-cutting initiatives, DFS-Hawai'i is trying to sublease some of its office space — three floors at the Watumull Building on Lewers Street and one floor in the Waikiki Trade Center.

Entertainment also has been scaled back, as free, half-hour live performances by Tihati Productions have been cut from twice nightly to one show each on Wednesdays and Fridays.

The retailer also closed its Kalia Grill restaurant in its flagship store because it was not profitable, Weiner said. The space has been converted to more retail.

The cost-cutting measures follow earlier reductions in staff and store hours, as well as a temporary reduction in rent paid to the state for contracts to sell duty-free and duty-paid items at the Honolulu airport.

The waiver relieved DFS-Hawai'i from paying about $16 million in fixed minimum rent from September to January, allowing the company to pay rent as a percentage of sales instead. Two bills that would have extended and further amended airport retail concession contracts recently died in the Legislature.