Excuse the pun, but retail within airports really is on the up. For many retailers, bricks and mortar retail growth is slowing, but travel retail, and specifically that in airports, has shown strong growth, which is expected to continue with the global duty-free industry expected to grow to about $67bn by 2020, from an estimated $45.7bn in 2016.
On the face of it, airports appear to be very positive environments for trading. A captive audience, often in ‘holiday mode’, with little to do but browse the shops until they fly, duty-free prices tempting people looking for bargain and favourable exchange rates for wealthy international travellers, all contribute to this.
Until recently, airport retailers have been able to rely on these benefits to maintain sales, however, things are changing. Retailers are finding they need to work harder to encourage passengers to spend with them before they fly due to 3 factors:
- Online shopping has reduced costs and allowed customers to compare prices across retailers, squeezing the gap between high street and duty-free pricing.
- Adoption of new technology (e.g. online check-in and self bag drop) has given passengers increased confidence that they will no longer queue for hours, resulting in them arriving later at the airport, reducing spending time.
- Shopping is no longer the only form of entertainment in the airport pre-flight. Passengers are now overwhelmed with the variety of leisure offerings being offered at airports; including luxury restaurants, cinemas, crazy golf, indoor gardens and spa treatments.
So, what are the opportunities?
Embracing Digital: Taking the retail touchpoints outside of the departure lounge!
Customers expect high street retailers to offer online shopping, so why not airports?
- Allowing customers to see, order and buy goods available at the airport in advance of travelling. This could be at home, on the way to the airport, or on the plane. Heathrow, Frankfurt and Changi amongst many others are already building their online shopping services this way.
- Offering convenience rather than competing with other leisure offers, i.e. having the goods ready and waiting at a passenger’s gate or lounge. This enables travellers to buy bulkier items, or non-essential items for a passenger’s trip and allows retailers to maximise their retail opportunities at the airport.
Reducing Anxiety: Minimise the worry about “getting to the gate” to increase dwell time
Airports are full of anxiety inducing moments which encourage passengers to congregate at departure gates often for over an hour in advance of their flight, rather than spending time (and money) engaging with the retail or leisure offerings:
- Give confidence to passengers that they do not have to rush to the gate through accurate location based ‘time to gate’ information, interactive maps or electronic queues which allow passengers to queue for boarding remotely, so they don’t feel the need to stand by the gate.
- Highlighting quieter vs busy areas in the terminal using live heatmapping for stores or restaurants, live queue lengths and self-payment options can reassure passengers that they will not miss their flight.
Big Data: Using data to target services appropriately and personalise passenger journeys
Airports have the potential to gather a huge amount of data to understand passenger journeys and personalise them along the way. Ever more detailed passenger profiling enables airports to focus advertising, offers and send rewards to the right people. They can link passengers together with a relevant selection of service offers (not just retail!) dependent on their preferences, location or destination.
Why haven’t these things been done already?
It isn’t easy!
Although airports give rise to a unique blend of potential customers and environment, they also have their own unique challenges for retailers:
- Customs regulations impose restrictions on the sale of duty free goods preventing the adoption of many standard processes such as payment online, home delivery or having collections points in convenient passenger locations.
- Space is at a premium. Unlike high street retailers who are downsizing due to too much space, airport retailers are constrained in small stores with little storage space and remote warehouses for stock. Coupled with a supply chain that includes additional security checks and restrictions, this means it is difficult to offer an extended range to customers (even more reason to go digital!).
- Connecting systems to gain a “Single Customer View” is a huge challenge. As for many large organisations, data is often held in legacy systems that do not share or connect data. This is complicated by the fact that there are many different parties involved, e.g. airlines, travel agents, airport, parking companies, retailers, restaurants who each ‘own the customer’ at different parts of the journey. We should also consider the new GDPR regulations that ensure customer data is managed appropriately.
The change is underway…
Airlines and airports are not shy when it comes to innovation and technology. QR code boarding passes, flight trackers, self-boarding gates, biometric passports and security scanners etc. are now commonplace. Using new digital solutions, innovative thinking and leveraging data that is already held by the airports will enable retailers to overcome the challenges faced.
There is also the advantage that learnings can be taken from the immense work done already by retailers online and on the high street which can be applied quickly to the unique airport environment.
With many airports already turning their attention to their retail offer, we predict that 2018 will see some exciting developments in the world of travel retail.