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Anyone who’s ever been stuck in a small European airport with nothing on offer but sticks of Toblerone, souvenir key chains, cheap sunglasses and dusty jars of the local olive pâté must, at some point, have felt the pain of a pent-up desire to shop — properly. Magazines, gum and a box of chocolates don’t often cut it when a traveler has time, money and the feeling of exhilaration and endless possibility that departure areas often impart.
This story first appeared in the August 13, 2012 issue of WWD. Subscribe Today.
But the sleepy airport retail floor could soon be headed the way of the twin-prop engine and the in-flight smoking section. While some of the world’s biggest airports — including London’s Heathrow, Dubai International, Hong Kong International and Singapore’s Changi — might already be famous for their luxury retail offer, other airports, large and small, are rapidly upping their game in order to captivate what is already a captive audience: They’re out to exploit the boom in luxury accessories sales, to cater to the diverse needs of travelers, especially the Chinese tourist, and to fulfill — and create — the desire to shop.
“Gone are the days of grubby airport retail,” says Nick Roberts, retail director of Mulberry, which has operated multiple stores at Heathrow for the past 15 years. “We’ll open a unit in Frankfurt in October, and we’re looking at airports in Munich, Zurich, Amsterdam and L.A., which are all aiming to bring in luxury names. All of them are looking at the growth in luxury spending and reviewing their retail portfolios.”
This year, Hudson Group kicked off a new retail project at JFK Terminal 1, opening stores including Michael Kors, Juicy Couture and Victoria’s Secret, all of which have a heavy accessories focus. In July, Lagardère Services Travel Retail, a division of Lagardère Services Group, unveiled the final additions to its 24,000-square-foot, high-end retail space at Paris-Charles de Gaulle. It includes a department store, a multi-brand fashion concept store and L’Avenue, a “street” of more than 15 luxury boutiques, including Hermès, Bottega Veneta, Tod’s and Burberry. Heathrow, meanwhile, is building a new and expanded Terminal 2, which will have a heavy focus on fashion brands. That opening is set to begin in the second half of 2013 and finish in 2019.
“Airports are already — and in the future this will be all the more so — terrific international windows for boosting brands’ awareness worldwide,” says Sabine Fagan, executive vice president of purchasing for Aelia, the central buying unit for the duty-free activities of Lagardère Services Travel Retail, which operates airport retail in more than 20 countries worldwide, including Paris-Charles de Gaulle.
Roberts says the Mulberry stores in the four Heathrow terminals see a total of 4,000 people each day walking through their doors — which outstrips footfall at the brand’s Bond Street flagship. The average spend per customer is the same as Bond Street, although the prices are 20 percent lower. BAA, the airport operator that runs Heathrow, asks its retailers to shave at least 15 percent off the current retail price of its merchandise as a perk for airport shoppers. In some cases, prices are 40 percent less than they would be on high street.
Mulberry’s shops at Terminals 3 and 5 are among the brand’s top five stores worldwide in terms of gross sales. “We treat the stores like flagships, and we consider them our windows on the world,” says Roberts of the Mulberry units, which have an average size of 600 square feet.
Mulberry isn’t alone in striking gold on the airport shop floor. For the past five years, Bally has notched double-digit growth from its 120 airport shops worldwide, while L.K. Bennett says its shops at Dublin Airport and Heathrow outperform the company average. The brands tend to carry a mix of the current season’s merchandise as well as classic items and bestsellers.
At Mulberry, about 55 percent of the merchandise is seasonless and 45 percent is from the current season. The Bayswater bag, a hero product for Mulberry, is also a bestseller at the airport. Harrods’ shops at Heathrow carry current-season merchandise, including cruise collections from brands such as Ralph Lauren, Roberto Cavalli, Jimmy Choo and Salvatore Ferragamo, and the store also creates capsule collections for specific destinations. “This season, sun-seekers heading to Saint-Tropez have sought out caftans and bikinis from Pucci, Missoni Swim and Melissa Odabash, yet we still offer cashmere jumpers, luxurious scarves and leather gloves to keep warm and stylish in Aspen,” said a spokeswoman for the store, adding that other customers use Harrods’ By Appointment personal shopping service at the store’s Terminal 5 boutique.
And while the actual merchandise is similar to what customers would find in town, brands will often tweak the mix to suit the needs of consumers in certain terminals. “We have to adapt the offer and sizes to passenger profiles,” says Fagan of Lagardère. The offer between two terminals in Paris can be radically different.”
L.K. Bennett is a case in point: It says that suits and closed court shoes perform best at Heathrow Terminal 1, which caters to the international business traveler, while fashion pieces and four-inch-plus heels are tops at Terminal 4, which caters to a broader passenger base.
According to Muriel Zingraff, retail concession director for Heathrow, Prada’s shop at Terminal 5 is the brand’s second-biggest U.K. concession after Harrods. “Ten years ago, it wasn’t even the case that Prada, Miu Miu and Burberry were in airports,” says Zingraff. “Today, it’s part of a brand’s strategy to be there.”
A study issued in July by Generation Research, which tracks the travel-retail market, revealed that global luxury sales in airport duty-free outlets will grow 25 percent in the next two years to reach $44.5 billion. In March, Heathrow saw overall luxury-goods sales increase 8.8 percent to 1.7 billion pounds, or $2.67 billion at current exchange, year-on-year.
Zingraff says a major driver behind the sales boom is — not surprisingly — the Chinese customer. “Their level of spending dwarfs everyone else’s. They represent 1.7 percent of all passenger numbers at Heathrow, and are responsible for 8 percent of turnover.”
She notes that some brands, such as Bulgari, have developed special products aimed at Far Eastern customers in particular, such as watches with a cherry-blossom design on the dial, which she said “regularly sell out” at Terminals 3 and 5. These terminals serve flights to and from the Middle East, Russia, Nigeria and the Far East.
Fagan says growth at airports is being driven by “new high-spending customers from Asia, Russia and Brazil. The highest spend per head in fashion accessories is by the Chinese, the Japanese and, depending on the brand, Koreans, and people from the Middle East.”
She adds that beauty — especially fragrances — remains by far the number-one-selling category at the airports with which she works. “Fashion is number two, with watches and leather goods being the biggest sellers, especially among Chinese customers.”
Roberts says Mulberry tends to see a broad-based international clientele, similar to the customers who would be shopping downtown, while Bally notes that its consumers are generally Asians, who typically spend an average of $500 to $1,000 on large leather goods with the brand’s signature red-and-white stripe. Bally’s retail sites within Asian airports including China, Hong Kong, Macau and Singapore are top performers. The brand plans to continue expanding its retail presence in airports in Southeast Asia, and to open sites in South America and Russia.
Over the past few years, the bigger airports have become increasingly aggressive in building spaces to lure the luxury brands—and their customers. “We’re behaving much more like retailers than landlords today,” says Heathrow’s Zingraff. “It’s a concession model — much like what you would see at Selfridges — and we share the revenue with the brands.”
Zingraff adds that Heathrow thinks more like a brand partner than, say, a shopping-mall operator. To wit, Heathrow and Mulberry collaborated an exclusive, bright pink limited-edition shoulder bag last year that customers were able to buy and set aside before they arrived at the airport. “People are looking for things that are different, something they can’t find elsewhere, and the bag was unique to Heathrow,” she notes. Going forward, “We want to be considered a place to launch limited-edition, special and new products.”
Speaking of launches, Dolce & Gabbana is making its first foray into airport retail this summer, with a shop at Heathrow’s Terminal 5.
To further its retail proposition, Heathrow plans to launch a personal-shopping service for its VIP clients by 2014. Clients can phone ahead to book an appointment and make the most of what Zingraff refers to as “dwell time” before the flight. Heathrow already offers multilingual personal assistants to shoppers uncomfortable with English. “Our main objective as retailers is to create a passenger experience,” says Zingraff. “We encourage the brands to be creative, and we want the customers to plan to come to Heathrow early so they can experience the brands.” She notes that Heathrow regularly quizzes its passengers about their thoughts on shopping and brands: “We have an amazing passenger profile, and there is so much information that has not been leveraged.”
Fagan of Lagardère believes the airport customer is a different animal from the downtown one, and needs to be treated as such. “Aside from the clear price advantage when buying duty free, many customers find it much less intimidating to buy at the airport than on the high street, because most shops have an open front and offer easy access to products. According to all our passenger surveys, customers are often in a different mind-set when they travel; more open to discovery and more open to self-indulgence and gifting. As a result, they are more demanding, and they expect a genuine shopping experience.”
Zingraff would agree: “Leisure passengers and families sometimes plan to make purchases at the airport, or they impulse buy, which is why we want to create areas that surprise and delight. The business passenger tends to make planned purchases, especially in jewelry.” And the discounts at Heathrow would also be an incentive for big-ticket items.
The Heathrow exec adds that the lack of doors in the shops is also enticing. “The fact that there are no doors has a huge impact on impulse buying,” she says. “People feel freer.”
Another type of airport consumer is the cash-rich, time-poor, hyper-organized sort who orders his or her items in advance. “We have people calling up and asking us to put products on hold, and they pick it up when they arrive,” says Mulberry’s Roberts. “Other passengers — even if they have 45 minutes to spare — will use the time in the airport to treat themselves.” Harrods is witnessing a similar trend. “Particularly at Terminals 3 and 5, we see returning customers set aside time before their flights to enjoy the shopping experience. We offer a reserve-and-collect service that is particularly popular for fine jewelry items and watch brands such as Cartier,” said the Harrods spokeswoman, adding that those particular customers might not have had time to visit the Knightsbridge store during their trip to London.