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Q & A with Willy Perez de Corcho, V.P. of Design Development and Compliance at DFASS

27-06-2010

by Jose Carlos de Santiago

DFASS is a duty-free company that has been providing airport services and onboard airline services for over 20 years. However, it has also branched out into other areas of the travel retail segment, giving passengers the chance to make catalog purchases with pre-order and mail order conveniences. Its full-fledged infrastructure and logistics –two issues broached briefly by Mr. Perez in this interview- allows the company to be one of the World’s most efficient and recognized companies.

To the best of my understanding, DFASS is far more than just a duty-free company, am I right?
We try to view our company not only linked to the duty-free business, but rather focused on everything related to travel retail, trying to get engaged with passengers from the moment they think of flying to the moment they arrive in their destination and fly back home. They usually make purchases in those flights and we try to make it easy for them through the stores we operate at the airports, the catalogs and the in-flight items on the planes, digit communications for duty free awareness, also through the mailing and emailing of catalogs and by means of our pre-order sites.

We also developed and own the necessary technology to help airlines carry out a kind of service commonly known as BOB (buy on board). An increasingly larger number of companies are beginning to sell in-flight food and drinks, headphones or rent DVD players, and we have what it takes in terms of technology and back office processes to help airlines manage it, through the use of DFASS Hand Held Computers , to pass their credit cards, receive any kind of currency from anywhere in the world and run all the areas from only one machine: they can sell duty-free, buy on board; everything related to travel retail.

So, then you are a company providing comprehensive services for airlines, aren’t you?
That’s right, and to such an extent that we’re strengthening our position within the hotel business to cater to passengers as soon as they get to those all-inclusive resorts.

Do you also have stores at the airports and a delivery system for people buying items in the airlines?
We have duty-free stores at the airports. Currently, we operate airport shops in Dallas, Chicago, Fort Lauderdale, Jamaica, Colombia, and have strategic alliances with the Nuance Group, one of the world’s largest duty-free companies in the airport Duty Free business. In addition, the pre-order service gives you the chance to request an item and find it onboard waiting especially for you. There are some items that might be a tad too big to sell them on board, but passengers may pre-order them and we will put them on the plane for them. We do that depending on the region. For instance, if we’re in Singapore –which is a duty-free port and many items there can be ordered by mail- we make a direct home delivery.

Does that mean you can deliver items to someone living in Singapore?
We make mail orders not only for people in Singapore. What actually makes the difference is that someone in the U.S. who wants to buy a duty-free item simply can’t do that in a domestic flight. But in Singapore all flights are international and since it’s a duty-free port, all items bought by a passenger can be delivered to his or her home.

We’ve talked about the four branches the company has to cater to tourists through the airlines: on-the-ground purchases, pre-orders, onboard purchases and mail orders. The fifth way is physically out of the onboard purchases, which is the purchase of items in the hotels. Is that correct?
Yes, this way we are able to reinforce our message with 190 stores and be able to cater to a broader spectrum of travelers

I can imagine your business edge lies in competitive prices compared to local dealers, doesn’t it?
Yes but also creating efficiencies and economy of scale throughout the supply chain. We also have a Loss Prevention department made up of 6 people who travel the world and minimize this risk to the business. One of the advantages our customers have is that they can come to us and we can provide them with a solution. That means the assortment of items available through us is far broader; it’s a more complete portfolio than the one you could have with a purchase area in which you need to deal with many suppliers to get all the items you need to put on sale. We have the full support of the companies that deal with those items and we also provide everything related to On Premise training.

How many stores do you have in airports around the world?
There are twenty two multiple-item stores, ranging from watch stores and perfumes to cosmetics, liquors, jewelries, confectionaries’…

What countries do you have stores in?
We operate stores in different U.S. states, in Colombia and Jamaica.

What about the names of the stores?
They have different names in different countries, just to give some local touch, you know.

Are they top-brand franchises or are they exclusively yours?
Most of them are ours, but we also have major partnerships with a number of suppliers in specialized stores, like in Dallas (Texas), where we run a tax paid Mont Blanc store and another one in Houston selling exclusively L’Oreal Group products.

When a maker wants to put an item of his in your stores or up for on board buys, what do they have to do?
They need to contact our marketing department and discussions on whether those items are attractive for our costumers begin. We also discuss whether they fit in our particular business operation profile, which is pretty complex on board due to space limitations.

Is your marketing department based in the U.S.?
Yes, in Miami

In what countries do you have warehouses?
They are in Miami and New Jersey (U.S.), plus in Singapore and Canada.

Wrapping things up, DFASS is a company devoted to the sale of duty-free items in airports, airlines, as well as pre-order and mail-order sales through catalogs. Am I right?
That’s absolutely right.. Our goal is to continue to work together with our supply partners and airline customers in enhancing through innovation the passenger’s travel retail experience

How many airlines do you supply?
Over 40 airlines. Our customers include airlines from Canada, the U.S., Latin America, Asia and Middle East.

I get a picture of this company running like a logistics enterprise. Is that correct?
Yes, we handle plenty of logistics, the operation, the back-office processes, the commission fees on sales. We’re talking about 55,000 flight attendants raking in commission fees on 20 different airlines, running all the cash operations of 74 different stations from around the world, the credit cards, cutting down on shoplifting through the security departments. Every six months we renew the catalogs, so go figure. That means that every six months we change the listings that we put in seventy four different stations around the globe. All of them are duty-free stations. We have to deal with customs offices from the different countries.

How many people work in your company?
We have a payroll of 600 employees scattered in the five continents.

It’s like a free trade zone or a huge industrial park. I assume that within the U.S. this operation leads to customs and security regulations for all major airlines. How do you handle that?
In addition to abiding by all established customs regulations required for running a fiscal warehouse and our entire business is certified in all the different competencies of our operation This means our company has passed all standards established by the regulatory entities in the U.S. Customs officers have taken a closer look at our operations and have seen the security levels we have, both physical and digital, and they have validated us. They’ve also checked on our company’s entire supply chain, from the moment the item is manufactured to the point it eventually winds up in our warehouses, and they’ve also seen that security is assured all across the board.

What’s the company’s volume of investment in security systems?
In our area in Miami alone, we have forked over a million dollars in antitheft security systems: cameras, alarms, switch cards, security personnel.

And for preventing breaches of the customs regulations, do you have a different security level?
Yes, we do have different security levels. Moreover, we know who our customers are. We know them well, we know what businesses they are in and we also know our suppliers. We have strict compliance protocols. We also know who our employees are and they have been through a number of screening processes to make sure who they are. Our business is to put goods inside the planes and we take this very seriously.

Your company is like a bank or currency exchange house in terms of the operations in different currencies that you run through. Who gives you the virtual POS system?
All systems are built by us specifically for our own industry. Some 20 or 25 years ago, the president of our company started up this business and there were not too many systems like in many countries and areas. As we have grown we’ve been bound to come up with our own systems. We are the owners and that’s part of the service we provide both our customers and airlines with.

Let’s talk for a while longer about the company. We know it came into being back in 1987. Who’s the founder?
Our president and CEO Bernard Klepach “Benny”

Is there only one owner?
That’s right, though we obviously count on a brilliant team that deals with different areas. Benny is a true visionary and a tremendous leader and source of inspiration for this company.

How much revenue does the company reel in?
Approximately $350 million per year.

How many different currencies do you operate with?
Around 30 of them.

Do you accept all credit cards?
Yes, but that depends on the region. There are certain credit cards that pose risks depending on the region, so we make adjustments.

American Express is causing a few problems and taking a nosedive in the market. Are you still accepting Amex cards?
That’s a pretty strong credit card for us.

How many square yards worth of warehouse space do you have?
Approximately 260,000 square feet.

Can you give me a ballpark figure of suppliers?
Somewhere between 500 and 700.

Within the continental areas you’ve worked in, Europe is nowhere around and you told me you pulled out of Europe a decade ago, is that correct?
That’s correct although some of our hubs are still physically located in Europe

Nearly halfway into the company’s existence you decided to pull up stakes from a continent.
I don’t believe we pulled up stakes from it. At that moment we were amid a controlled growth plan in the Americas and we decided to focus our resources on that

What are the main wine areas you buy from?
Right now France, California, Chile, Argentina. Demand in Latin America has changed everything related to malvec wines, or wines from Uruguay or Chile, over the centralization of French wines. At that point, the assortment is pretty broad.

I assume that has to do with the price of wine.
Absolutely, and also with the transportation.

The sale of cigarettes and cigars used to be among the most important ones in both airlines and airports. What items have replaced tobacco?
For us it’s still very important and they rank among the bestselling items. In those airlines where their sale has been scrapped, a variety of offers has taken up the slack. But such items as Marlboro are still high on the list.

What about cigars? Are they in demand?
we are now seeing increased demand and better packaging that appear to preserve the product for a longer periods of time

Is there any kind of item that has had some kind of on board sale explosion?
Liquors in the Americas, Cosmetics in Asia and electronic gadgets worldwide.

Cosmetics rather than perfumes?
Perfumes are always on high demand, but cosmetics and skincare products have been on the rise.

Items for men too?
No yet, but its getting a big push as well. We are closely monitoring this

One last question, how many companies like yours are there in the world?
There’s no such thing as a company like ours, offering all the services we deliver and branching out to all the different points in the travelers journey. Airport retail, in-flight Duty Free, onboard pouring, Buy On Board programs, PreOrder programs, Mail Order programs, Hospitality etc; and all this spreads out in 5 continents.

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