Global Expansion of Heinemann: Factors Affecting Consumers and Retail

This report investigates the factors influencing Heinemann's global expansion, particularly focusing on consumer behavior within the context of duty-free and travel retail. It examines the company's operations, including its history, diversification strategies, and market presence. The report analyzes consumer behavior through cultural, personal, and economic lenses, exploring how factors like income, savings, and credit impact purchasing decisions. It contrasts domestic and airport retail, highlighting the unique characteristics of each environment and their implications for consumer behavior. The methodology includes research aims, objectives, and questions to guide the analysis. The literature review delves into factors affecting consumer behavior, comparing domestic and travel retail. The report also explores how economic factors, such as income expectations and consumer credit, influence purchasing decisions. The findings aim to identify key elements that could facilitate Heinemann's global expansion and better understand the differences between airport and domestic retail.

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Table of Contents
Chapter 1: Introduction....................................................................................................................3
1.1 Duty free retail.......................................................................................................................4
1.2 Research Aims and Objectives..............................................................................................4
1.3 Research questions.................................................................................................................5
Chapter 2: Literature Review...........................................................................................................5
2.1. Factors affecting consumer behavior....................................................................................5
2.2 Economic factors affecting consumer behavior....................................................................6
2.2 Domestic and travel retail....................................................................................................10
2.2.1 Domestic retail..............................................................................................................10
2.2.2 Travel retail.......................................................................................................................11
2.2.3 Comparison between domestic and travel retail...............................................................12
Chapter 3: Research methodology.................................................................................................14
3.1 Research Philosophy............................................................................................................14
3.2 Research purpose.................................................................................................................15
3.2 Research approach...............................................................................................................15
3.4 Research design...................................................................................................................15
3.5 Data collection process and analysis...................................................................................16
3.6 Timeline...............................................................................................................................16

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Reference List................................................................................................................................17

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Chapter 1: Introduction
Heinemann is an online based company that runs effectively in the duty free sector since
1879. It serves as one of the biggest companies in the international travel market as per its Duty
free operation such that they are exempt from tax payment. It is a family owned business which
initially started with the provision of tax free wholesale of tobacco products and plants. Over
time, Heinemann started supplying cosmetics, perfumes and luxury products like accessories,
souvenirs and confectionary (Heinemann, Hummel & Steidl, 2014). It has with 6,000 employees
and operates in 100 countries. The retail sector of Heinemann is very active with the provision of
more than 320 Heinemann
Duty Free & Travel Value shops that operates in more than 77 airports in around 28
countries. This has benefitted them in reaching over 40 million travelers every year. They try to
attract consumers in several ways by making new premium services with the provision of most
modernized logistics centers in Europe. They have highly standardized IT services that has made
them a logistic specialist with professional service solutions. The number of passengers are
increasing at a continuous rate but the rise in sales is comparatively lower. The diversification
strategy has effectively improved the price of products in the related fields with respect to
effective market strategies and outcomes. The company is trying to increase its business ventures
by expanding into newer markets (Howells, 2016). It is expanding its business operations with
respect to diversification of products over a large number of areas that can effectively improve
the structure of the business operations in the overseas markets. Therefore, it is important to
identify the factors that can help in the process of global expansion for Heinemann. This can be
effectively analyzed with respect to consumer choice and preference for goods and services.

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1.1 Duty free retail
Duty free shops or retail outlets provides products to international travelers. These stores
are free from the obligation of paying high taxes or excise duties that is imposed on the retailers.
Duty free stores are tax free under the condition that goods are sold to those travelers who can
export them to other countries. Heinemann extracts huge profits as it provides duty free exports,
although sales from duty free exports has not increased. These goods are greatly influenced by
the effective strategies that lowers the price by significant portion. The passenger traffic in the
airports has sharply increased by 6.6 percent within a year, as presented by the Airports Council
International. Rise in international passengers is about 8.4 percent which has effectively
increased the number of footfall in the travel retail. Airports are effectively arising as the
microcosmic town centers where the retail sales has significantly increased. The profits earned
from these non-aeronautical sectors is effectively huge that creates plenty of opportunities for the
growth of airport retail as per the duty free exports (Thubert et al., 2017). The airport retail is
effectively managed by the international travelers that can change the way goods are produced
and served in the economy.
1.2 Research Aims and Objectives
The purpose of the paper is described by this section which is significant to the study. The
aim of the paper is to identify factors that can affect or lead to global expansion. The aims of the
paper is attained by a clear set of objectives that effectively acknowledges areas that needs to be
researched. The paper has the following research objectives:
 To find out the factors that can help in the global expansion of Heinemann
 To find out factors that can affect consumer behavior

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 To study the difference between domestic retail and airport retail with respect to
consumer behavior
1.3 Research questions
The essential elements needed in a research are analyzed through a set of questions that is
effective for the analysis and outcomes. The paper has the following set of research questions
which are as follows:
 What are the factors that can help in the process of global expansion for Heinemann?
 What are the factors that has an impact on consumer behavior?
 What is the difference between airport retail and domestic retail?
Chapter 2: Literature Review
2.1. Factors affecting consumer behavior
Customer behavior is dependent on three factors like culture, personal factors and
economic factors. It relates to the selection, buying and consumption of goods and services as
per the satisfaction and utility of the customers. The cultural factors that drives consumer
behavior are buyer culture, subculture and social class where buyers buy goods as per their
cultural background that is effectively driven by religion, social status and regional
diversification (Rui, 2015). Wants are differentiated in terms of nationalities, racial groups,
religion and geographic region that makes the uniqueness of consumer preference (Ramya & Ali,
2016). Each society has a different social class and it is important for marketers to differentiate
them for extracting super normal profits. Reference groups can influence the decisions of
individuals as they have great power in the society and can effectively influence price.

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Social factors are actively dependent on status, role, family and groups. Differentiating
people with reference groups is effective as some prefer branded products and others prefer both.
Moreover, consumer demand is different for different age groups due to age groups of the
family. Every individual has a different role which is based on clubs, family, groups and
organization. Demand is determined by personal factors as well that influences the buying
behavior as per their taste, choice, preferred brand, lifestyle, occupation and economic situation
(Balabanis, & Siamagka, 2017). People needs goods according to their work style and economic
situation, such that a good economic situation or higher income generates demand for luxuries
products and vice versa.
Customers prefer goods that has the added benefit of cancelling deals whenever they
want and the money will be returned to them within a specified time frame which not possible in
travel retail. Airport retail offers a range of benefits and has the added advantage of a
commercial area that works effectively for increased level of airport visits and retail sales.
However, similar goods are sold in both the sectors which differ in term of operation. Therefore,
it is effective to analyze factors that makes an effective comparison between the two markets.
2.2 Economic factors affecting consumer behavior
The behavior of consumer regarding the choice and demand for goods is largely dependent
on the economic factors such as personal income, income expectations, family income, savings,
liquid assets, credit of the consumer and other economic parameters. These fctaors can have a
significant impact on the demand and supply of goods as consumer behavior denotes the level of
goods to be produced and served in the economy. This is significantly dependent in the value of
goods and services that cannot adequately change the value of goods and services in the
economy that changes the surplus value for sellers:

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 Personal Income- the total earning of the person from investment, wages and other
ventures is referred to as the personal savings of the person. It is the aggregate value of
the all incomes received by an individual within a given period of time. A rise in personal
income denotes a higher demand for normal goods as the value of expenditure goes up by
greater amounts. Similarly, a fall in personal income can lead to a fall in consumer
demand as the expenses o shopping, luxury items gradually foes down.
 Income expectation- The expectation of people denotes a huge impact on consumer
behavior. This is because if consumers expect that their income will go up in the future,
tht start spending the money which increase the aggregate demand and expenditure level.
However, if the consumer believes that income is expected to go down, then the
individual will save more and consume less.
 Family income- The total income of the family that comes from the earning members of
the family denotes the family income. If the family income is more, the family is like to
shop more, visit new paces, dine out more often on big restaurants and present each other
with gifts. They are like to go in branded places that can have a significant impact on the
retail industry as per goods are supplied. Lower family income will ensure that family is
not likely to do these activities and try to save after they meet with the daily
requirements.
 Savings- Customer behavior is denoted by the level of aggregate savaging such that when
the person chooses to save more in the current period, expenditure on luxuries and
branded gods will down by significant amounts. The expenditure will be based on
necessity items.

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 Liquid assets- The assets that can be converted into cash as quickly as possible is known
as liquid assets which comprise of bank balance, marketable securities and the cash in
hand. More the availability of liquid assets, more is the expenditure level and vice-versa
as people can quickly spend the liquid assets.
 Consumer credit- The credit facility given to customers for buying durable luxury and
comfort based products is known as credit facility. The credit system is made available to
the sellers whether directly or by financial operations of the banks that is given to
customers through bank loans, installments, hire purchases and many other ways that
makes buying easy and affordable. As more credit is given on items, consumers buy the
luxury items as guided by their behavior which leads to higher standardized living.
 Other economic factors- A range of economic indicators like inflation, interest rates,
business cycles, economic downturn, job opportunities, labor market fluctuations,
political system and recessions can have a huge impact on consumer behavior as they
adequately change the demand for goods and services. A lower interest rate can increase
consumer expenditure. If economic activities go up in the economy then people can will
surely spend more. Business cycles denotes the performance of business which can affect
the layout market and job market respectively. A market with better job opportunities and
high living standards denotes a rise in consumer demand for goods and services. Higher
inflation will lower demand as price of goods is very high and they save money for future
expenditure. Political system is very important as the policies imposed by government
can have a significant impact on consumer behavior for buying goods and services.
These factors can have a huge impact on several industries as the buying capabilities of the
customers are effectively guided by such factors. Moreover, consumers can buy products either

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in a planned way or unplanned and impulsive way. Planned buying is the purchase of products
after analyzing the markets and understanding the pros and cons of the product. The process is
basically very time taking, but is very efficient. It is followed by the customers who is active in
the market and has knowledge over a wide range of products. On the contrary, impulsive buying
refers to unplanned buying of an individual. Impulsive purchasing happens when the individual
experiences a sudden need to buy the product that the person cannot resist from buying which is
driven by emotion or previously unrecognized desire. Therefore, buying behavior cannot be
denoted by a single factor. Impulsive buying can be effective or ineffective, but the individual
feels sudden urge to buy the good within that time period which cannot be ignored. This can
affect producer surplus in a positive way, however sellers become unaware of how much
products needs to be reduced for generating profits. On the other hand, planned buying is more
effective for both buyers and sellers as they are able to relate to the value of goods being sold or
purchased and produce goods accordingly.
Yet, consumer behavior is guided by several other factors like that of complex buying
behavior, variety seeking behavior, habitual buying behavior and dissonance- reducing buying
behavior. Some people seeks for variety even if they are satisfied for previous products as they
try to use every alternative. Habitual behavior signifies that an individual does not have a
preference for brands. However, most of the people has a complex buying nature such that they
can either buy expensive products on some days, inexpensive on other days, the can frequently
chop on some days and level on the rest of the days which can have significant impact on the
aggregate expenditure and the way sellers supply products. Dissonance reducing buying behavior
indicates that consumer faces several problems while choosing the correct brand as they
constantly change their brands as per the position in the market.

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The person can be also be influenced by group behavior such that some wishes to buy what
others are buying and other wish to ignore what they are buying. Thus, consumer behavior has a
significant impact on the markets which denotes the profit of sellers.
This difference can be established frrom the level of sales in travel and domestic retail.
Studies by Suwala (2015) are based on the dependence of the two sector but has not studied
about a change in the pattern of growth with respect to revenues. There are other psychological
factors that drives customer dependence on domestic retailing such as motivation, belief,
perception and attitude. Each person has their own perception of choosing commodities that is
crucially analyzed by the domestic retailers as they belong to the same commodity.
2.2 Domestic and travel retail
2.2.1 Domestic retail
The process of selling goods and services to consumers with the usage of multiple
channels for distributing the goods to reach out to a wide range of customers. Retailers sell their
goods through a supply chain to earn economic profits (Shi et al., 2018). The term domestic
retail is used for the local distributors who supply and distribute goods in the local market
without the consent of the people. Domestic retailers are generally small service providers who
fills up a wide range of small orders for many individuals who are normally the end users. These
providers does not sell it large orders to a small group of corporate, whole sale or government
client. The retailers are called domestic retailers as their distribution is based on the local market
who can either purchase the goods from the wholesaler or directly from the retailer. Retailers sell
huge a wide range of products to the customers from food, clothing, cars, furniture, footwear,
musical instruments and daily consumable products.

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2.2.2 Travel retail
Travel retail is another name for airport retail which is located in the airport city or inside
the airport area where goods are distributed to the customers for several stores. Airports are
operated and organized by federal. Local or state government which provides a huge source of
funding. Few airports are owned and operated by private companies but most of them are
operated by government that makes it attractive for doing business (Cawley, Willage, &
Frisvold, 2018). The bidding happens after every tears that enables retailers to buy big stores in
the name of big brands. Airports are heavily used by tourists, business dealers and other people
who spend a lot of time in the area before and after the departure. They require food and other
range of amenities within that period and setting retail works is effective for business
development and effective growth (Suwala, 2015). This has led to a rise in retail opportunities in
the airport region. Several items are now sold in the retail stores like clothing, shoes, jewellery
accessories, hardware, mouth fresheners, perfumers and a range of confectioneries and sweet
shops. There is a broad difference between airport retail and domestic retail that can be
interpreted with respect to consumer behavior.
Significance of domestic retail and travel retail
Domestic retail forms an integral part of business these days as the supply and demand
for the goods are truly affected by the retailing process. Retailing needs adequate knowledge on
customer preferences that is adequate for value propositions, setting up of retail stores, creation
of retail networks and supply chains, setting up with several merchandise and arranging with
different groups of people to buy products from the merchandise (Zhang & Wei, 2015). Retail is
bought from several people who can effectively use these goods and services to change the way