GMR gets into duty-free retailing

GMR Infrastructure is gearing up for an experiment.

It is foraying into retail, which is a new area for the group. The retail activity would be kicked off shortly with the opening of a duty-free outlet at the Rajiv Gandhi International Airport at Shamshabad in Hyderabad.

“This is a new area of the group and there is a lot of learning that is yet to happen. Based on the experience, the group would look at expanding in the sector,” a GMR official associated with the activity told DNA.

In fact, the group has already incorporated a new company - Hyderabad Duty Free Retail Ltd - as a 100% subsidiary of GMR Hyderabad International Airport Ltd (GHIAL), which, in turn, is a subsidiary of GMR Infra.

The outlet at the Hyderabad airport was originally operated by Switzerland-based Nuance through an arrangement with Shopper’s Stop. However, due to a variety of reasons, Nuance exited the business, leaving the duty-free shop at the airport to GMR.

According to sources, though GMR tried to invite bids from other global players for operating the outlet, there was not much response and the group had then decided to go on its own. It has absorbed about 50 employees hired by Nuance.

“We are currently working on getting some approvals from the government. Internally, we are hoping to start the outlet by middle of June. But, if it gets delayed, it should happen in early July,” the official said.

While the investments are “not going to be very significant” in this venture, this would provide an opportunity for the group to understand the activity and look for expanding it to other airports if found viable.

“The group has no exposure to retail so far. Even in Delhi airport, we have a reputed foreign company operating the duty-free outlet. Based on the learning in Hyderabad, either we will go out and bid for operating outlets in other airports or rope in a partner for Hyderabad too, if we can’t operate the outlet,” the official said.

According to sources, the company had two key problems. It was on the radar of the customs officials after some of its employees were allegedly caught while selling duty-free goods to outsiders.

Secondly, the footfalls were extremely low making the entire operations unviable. “The duty-free outlet in Hyderabad has never been a revenue churner. Most of the traffic coming to Hyderabad is from Dubai. They anyway buy a lot of goods in Dubai duty-free before landing in Hyderabad,” the source said. However, the GMR officials are confident of increase in footfalls with the marketing teams of the airport promoting the hub concept to bring more foreign carriers to Hyderabad.