Name change for DFS heralds new strategy for company

DFS Group, a luxury retail seller for travelers, is changing the name of its Waikiki retail center to T-Galleria, which the company hopes will differentiate the shopping experience there from its airport stores.

DFS said it will be changing to the T-Galleria name on all its stores in downtown locations between now and the end of next year.

"DFS will now have two channels of distribution," said Philippe Schaus, who visited Oahu last year for DFS Hawaii’s 50th-anniversary celebration as the company’s newly minted chairman and CEO and returned this week for the renaming.

Schaus says the "T" in T-Galleria stands for "travelers" and that it was chosen in part because it symbolically represents an airplane.

"Choosing a one-letter brand name is very bold and yet easy to remember and identify," he added. "Really, we’re just naming what we’ve become."

Like all retailers, they’ve got something to prove. Greater luxury retail competition and an increasingly diversified mix of global spenders, especially from high-growth markets like China, Taiwan and Korea, have created a need for DFS to step up its game in much the same way as the state’s visitor industry has had to reinvest in the product.

Since it was founded in 1960, the Hong Kong-based company has been synonymous with duty-free shopping.

Over the last few years, the company invested more than $50 million in its Waikiki location to evolve into a retailer that can compete with luxury stores like Harrod’s. DFS hopes to become a destination itself, attracting travelers to Waikiki to shop at its store.

Its plan is also an extension of the Hawaii visitor industry strategy to grow tourism by concentrating on attracting higher-spending travelers over simply increasing arrivals.

"Competition among shopping centers and tourism destinations is stiff, and trying to lure the luxury business brings in more bang for the buck," said Waikiki-based retail analyst Steph­any Sofos, who has been tracking DFS since the mid-1980s. "It’s better for the destination if we bring in 1,000 people who spend like 10,000 people."

Sofos said she remembers when DFS Hawaii was the only "luxury game in town, with the exception of Gucci and Chanel." Now, in Waikiki alone, Sofos said, there are more than two dozen luxury retailers for travelers.

The Waikiki DFS store is the company’s second largest after Four Seasons Macau. DFS has 14 Gallerias and 18 international airport locations in 10 countries and three continents.

"We are so ingrained and dependant on Hawaii," Schaus said.

While DFS’ new re-branding and travel push has been the buzz among retail circles for some time, it’s been shrouded in mystery. This week DFS Hawaii draped its facade in a red-and-white wrap designed by artist Jasper Wong, who brought Pow Wow to Kakaako. DFS plans to keep the wrap, whose design includes many variations of the letter "T," up for a few weeks to further engage the community and its clients.

"Have you seen the outside of the building? I looked up and said, ‘Oh my God! What happened?’" said Waikiki Neighborhood Board Chairman Robert Finely. "They’ve been transitioning ever since they opened there, and they used to have an aquarium and all those shops. They’re continually changing."

Rick Egged, president of the Waikiki Improvement Association, said DFS Hawaii’s revitalization in the early 2000s was a driver for all of Waikiki to upgrade its product. Over the last 12 years, the destination has completed $3.5 billion in improvements, not counting the upcoming renovation of the International Market Place and the Sheraton Princess Kaiu­lani hotel.

"By bringing their luxury travel clients to Hawaii, DFS is showcasing all that Waikiki has to offer," Egged said.

Mark Bratton, a vice president with Colliers International, said all the hoopla from DFS’ branding and its renewed focus on shopping as a travel experience, when combined with the redevelopment of the International Market Place, will create new incentive for visitors to come to Waikiki.

"We appreciate major companies spending money and bringing more customers to Waikiki," Bratton said. "Many big companies are after international shoppers, but it’s rare to see one actually get involved in creating visitor demand. It’s a unique and pioneering strategy that I think will work for them and in general will benefit Waikiki."

The company’s strategy also ties in with the Hawaii Tourism Authority’s goal of offsetting a lackluster domestic performance next year with really bullish gains in small markets like China, Korea, Taiwan and Latin America and aggressive goals in larger international markets like Oceania and Japan. That’s right up DFS’ ally since many of the 35 million world travelers who go through their stores worldwide are increasingly coming from emerging markets.

DFS Hawaii has seen double-digit growth in shoppers from China over the past six years and expects to see similar growth in the coming years, said David Charles, Pacific region president of DFS Hawaii.

"Shopping is one of the most important activities for Chinese consumers when they travel overseas," Charles said. "Accessibility to shopping is a key determinant to Chinese travelers in electing a destination."

Chinese travelers dedicate a higher proportion of their travel budget to shopping, more so than any other nationality that comes to Hawaii, he said.

To attract more visitors from China to Hawaii, Charles said Hawaii needs to build greater brand recognition among the Chinese. Through this re-branding and other initiatives, DFS is doing its part in this market and others.

"We have to evaluate our game — a lot of what was fine is no longer fine," Schaus said. "Our objective is to be the world traveler’s preferred destination for luxury."

Recently the company has been bringing journalists to Hawaii for familiarization trips that spotlight all that the isles have to offer, including shopping. They’ve also worked with tour operators in their own countries to help organize trips for high-end shoppers. While shoppers are here, store associates also are encouraged to help them create memories that will make their purchases more meaningful.

"Your experience doesn’t have to be chocolate or mac nuts; it might be a Cartier watch. But if you can tie it to a guided tour through the Koo­laus with a botanist, all of a sudden that watch takes on an incredibly different personal meaning," Charles said. "It’s this kind of personalized connection that we are striving to give our customers."

The Waikiki store also offers concierge and lounge services for their top customers that aim to surpass the service that they are accustomed to getting at the best airlines and hotels.

"We are among the best department stores in the world, but we are completely obsessed by the notion of travel and the customer as he is traveling," Schaus said. "Most department stores come from serving the local market with the widest variety, but we come from serving the traveler. It’s a different point of departure."