

HONG KONG—The game of attracting Chinese shoppers has gone global.

DFS, the world's largest travel retailer and operator of duty-free stores in 17 airports around the world, is vying for more from the globe-trotting Chinese.

Last year, DFS sales totaled $4.3 billion, an increase of 16% from the year before, according to industry magazine Moodie Report. More than one-fifth of that came from Chinese tourists, who have emerged as the company's top customer in the past two years.

Duty-free shopping conjures images of discounted whiskey, perfume, and cartons of cigarettes. But DFS, which also runs multibrand stores outside of airports, is focusing its offerings on luxury items, from expensive handbags and watches to cosmetics and skin care, with its latest improvements targeting U.S. shores.

Earlier this month, it relaunched its downtown Waikiki store in Hawaii with a new logo, and later this month it is opening 25,000 square feet in new retail at Los Angeles International Airport and concessions at John F. Kennedy International airport in New York.

Last year, China ranked as the world's top spender on tourism, shelling out $102 billion while traveling, according to the United Nations World Tourism Organization. And according to DFS, a Chinese tourist in Hong Kong will spend 3.5 times more than the average tourist, and almost 10 times more at some airports in the U.S.

Philippe Schaus, chief executive of duty-free store operator DFS Tobias Reeuwijk for The Wall Street Journal

Philippe Schaus, who was named the company's chief executive last year, spoke to The Wall Street Journal about the evolution of the Chinese consumer, the resurgence of U.S. airports, and why DFS stores are going for a more masculine appeal. Edited excerpts:

WSJ: How do you plan to capture the growth of travelers from China?

Mr. Schaus: It's about locations, of course. The No. 1 travel destination outside of mainland China is Hong Kong and Macau. But beyond that, you see a growing number to Europe, Southeast Asia, Oceania and Hawaii. The appetite for traveling is growing—it's virtually limitless.

WSJ: How has the profile of your customers changed?

Mr. Schaus: The typical customer 10 years ago would be middle-class, Japanese, an office worker going to Hawaii with friends, with a limited budget for luxury products. Today, our most frequent traveler would be an upper-middle-class Chinese traveler who has quite a high budget for luxury. And shopping, even more than for Japanese, is a big part of why they travel.

WSJ: How are the buying patterns of Chinese customers different from others?

Mr. Schaus: The watch plays a big role with the Chinese, as it indicates status, much more than in Europe and in the U.S. Gifting is really important. Bringing somebody back a good bottle of whiskey, cognac or baijiu [a Chinese liquor] is very important.

The men's business is much bigger for China. We're trying to create environments that are more masculine, and bring in the best men's brands. We're bringing in more of a "club" atmosphere, somewhere where you can find your briefcase, men's skin-care and watch in one place.

WSJ: China's government is cracking down on gift-giving and corruption among its government officials. Has this affected their spending at DFS?

Mr. Schaus: We've seen minor moves. The purchase of high-end spirits is less widespread than before. On the watch side, we've seen marginal moves. But not a big change in our business.

WSJ: Real estate is so tight in airports. What is your strategy in acquiring spaces?

Mr. Schaus: We're paying on a percentage of revenue to the airport. Our rent can even be higher than the highest retail rents in the world.

There are two different attitudes [taken by the airport]: There can be the airport who is solely focused on the financial side. A bidder who invests less in the store, staffing and layout will look attractive to the airport, paying a higher percentage [of sales] to the airport because of lower cost base. That's what we are not.

We do everything to upgrade the customer. And that may go in line with the airport that is going after the routes which cater to the high-paying customer.

WSJ: DFS is opening up new stores in Los Angeles as well as in John F. Kennedy airport in New York. Why now?

Mr. Schaus: There is a renaissance among airports in the U.S. and the best example for that is certainly Los Angeles.

We know for the Chinese that the U.S. is high on the agenda but it's complex for them right now [because of visa restrictions]. So it's limited, but we believe, progressively, that it will soften. There will be a huge business of Chinese travelers, which is why we put a lot of money in the Los Angeles airport.


Education: Studied aerospace engineering at University of Liège, graduating in 1987; completed an M.B.A. at Insead in 1990

Career: Started as a consultant at Boston Consulting Group in Germany in 1990; joined Villeroy & Boch in 1999 and later became managing director of its porcelain tableware division; joined Louis Vuitton in 2003 and became executive vice president at the brand in 2009; joined DFS in 2011 as group president of merchandising and marketing; named chief executive in 2012

Extracurricular: Classical guitar, photography