Never mind lengthy Air France strikes or ailing airlines going bust. Global air traffic is blooming, yearly serving 3.3 billion passengers, or 44 percent of the world’s population, versus just 1,205 people a century earlier, when commercial air travel started, according to the International Air Transport Association. And yet, one area of commercial travel is lagging behind the industry’s burgeoning footfall: travel retail.
“By and large, consumers are bored with airport retailers because they all look the same,” lamented Ibrahim Ibrahim, managing director of Portland Design, a London-based agency that helps airport retailers up their game.
“Airports have the most attractive and sought-after audience,” he added. “It is captive, shows a high level of adrenaline, is excited and open to discover new ideas and experiences. The global access that airports have is an amazing opportunity. Yet retailers fail to deliver.”
Ibrahim sees the future of travel retail to be dominated by two mantras: “brutal simplicity and absolute convenience.” He cited yoga rooms and digital technology, already in place at OTG restaurants at airport gates, where travelers can order food via iPads, as the way to go forward.
“It’s not about designing columns and buildings. It’s about designing journeys,” he said, adding that what will count in the future is not “making shopping entertaining, but entertainment shoppable.”
According to Ibrahim, “participation is the new consumption.” Buying a bottle of whiskey at a duty-free shop will at least involve tasting it and speaking to an expert before making an instant purchase with one click on a smartphone and having it subsequently delivered to the gate, he predicted.
“Going on the brand’s Web site is history,” he added. “Turnover [in airports], like all other retailers, will shift from in-store to online transaction.”
And the rewards are high — especially for fashion brands.
While in the past, categories such as wine, spirits and tobacco products had a run, it’s now fashion and accessories’ turn to shine, according to Jérôme Goldberg, managing director of Paris-based JMG-Research, which tracks travel retail activity around the world. The category was the fastest growing of all between 2012 and 2013, up 10.3 percent, and now ranks third with 14.6 percent of the market share, following fragrances and cosmetics with 28.8 percent, and wines and spirits with 16.4 percent.
In 2013, sales of fashion and accessories totaled $8.7 billion in the channel. “We know the market is due to grow 5 to 8 percent each year for the next 10 years. Global travel retail and duty free, which is now at $60 billion, is expected to reach $100 billion in 2020 and double to $120 billion by 2025,” Goldberg said.
Viewing such prospects, he added: “Brands cannot afford not to be present at airports.”
In terms of geography, the Asia-Pacific region was the best-performing market in 2013, generating $22.3 billion in duty-free sales, followed by Europe with $20.1 billion. And Goldberg projects that the region will likely stay the main driver in the years to come.
Although the researcher also criticized the “copy-paste consumerism” prevalent at airports the world over, he was upbeat about prospects for change.
“With the new wave of airports revamping their offer, it’s going to be easier for those brands to move into the segment,” he noted, citing Charles de Gaulle, where Chanel set up its first store at a French airport last fall, as an example. “Travelers expect to see those [local] brands, and they were warmly welcomed at CDG — by Chinese passengers especially.”
Filip Soete, chief commercial officer of Cote d’Azur Airports, whose properties are in the process of a major makeover, said the problem is that most existing airports were built 20 or 30 years ago before exhaustive security checks became necessary; they were designed to welcome or bid farewell to travelers.
“This has changed. Security has become a big barrier. In Nice, we are planning to reduce the public area and increase the spaces behind the security checkpoints,” he said of the airport’s makeover, a large share of which began operations last month at Terminal 1, with another portion expected to be up and running starting in May 2017 at Terminal 2, including an increased seaside view for travelers to take one last look at the Riviera before leaving.
“Our vision is: We want to be different. We don’t strive to be the most technologically advanced or the most luxurious airport, either. What people want is to get one last flavor of the place they have visited,” Soete said.
Local color is key to making travel retail more profitable, confirmed Peter Mohn, chief executive officer of Swiss market researcher m1nd-set, which asked 20,000 air travelers what motivated them to spend money while waiting for boarding.
“The good news is people’s preferred activity at airports is shopping and browsing. The bad news: It’s only half of all travelers, or 47 percent,” Mohn noted, adding that the number should be as high as 80 or 90 percent. “What travelers expect is something different from what they can find downtown or online. Seventy-seven percent say they want the airport experience to have a local flavor; 70 percent say they would spend more at the airport if there were local products.”
In Nice, which, after Charles de Gaulle is France’s second-largest airport, this will translate into a Chez Pipo outpost, a downtown restaurant offering socca, a local chickpea specialty, as well as a beach bar, complete with deck chairs and a menu compiled by French chef Thierry Marx.
Dior and Chanel will take a back seat to homegrown brands like Vilebrequin and Façonnable, represented prominently, as both terminals are slated to double their retail and lounge spaces. Britain’s star cook Jamie Oliver, meanwhile, will take a stab at local cuisine, with a restaurant dedicated to Italian and Mediterranean fare.
Soete estimated the total revamp will cost between 30 million and 40 million euros ($36 million and $48 million).
He further plans to make shopping at the airport easier via special apps, telling travelers the time remaining before boarding, or presenting special offers suited for individual passengers. A golf enthusiast and loyal customer could be given the opportunity to purchase his golf stick at 15 percent off — “and why not have it delivered to his home?” Soete reasoned.
The promise in travel-retail shopping is evident with LVMH Moët Hennessy Louis Vuitton planning to open Europe’s first DFS store outside of an airport, at the Fondaco dei Tedeschi in Venice, in 2016.
“A downtown duty-free shop will change the DFS landscape in Europe,” Goldberg said, reminding that LVMH has another unit waiting in the pipeline at Paris’ landmark department store La Samaritaine, currently under construction.
It operates like a regular store, but shoppers will need to show some documentation, like a passport or plane ticket, to take advantage of the duty-free rates.
Selective retailing, which includes beauty giant Sephora and DFS, is the French luxury group’s second-largest division after fashion and leather goods. Sales within the segment totaled 9.5 billion euros, or $12.6 billion at average exchange for the year, in 2014 versus 10.8 billion euros, or $14.4 billion, in fashion and leather goods. LVMH said DFS “made substantial progress, spurred by development at North American airports renovated at the end of 2013,” and that it would continue “to selectively review opportunities to diversify its product offering and its geographic coverage.”