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Airport Retailing – No matter the pandemic, the sky is still the limit

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As part of transit retail, ‘Airport Retailing’ is by far considered the most lucrative. People flying in and out of the countries / cities took to shopping as their best bet to ‘kill the waiting time’. From local to national to international brands, each of the airports have become home to a wonderful world of retail offering customers an array of choice from basic products to luxury merchandise. In India, with airports being at par and in some cases above notch the other international airports, airport retailing has undergone a tremendous change. Today, it is no longer only about food and duty-free shopping, airport retailing has taken an altogether new dimension and is aptly being referred to as ‘Travel Retail’.

As stated in a report by global consultancy, Knight Frank Research, India’s airport retail segment is expected to grow to US$ 9.3 billion by 2030 from its estimated market size of US$ 1.6 billion in 2019. In case of key markets of Mumbai and Delhi, the airport retail developments garner a revenue of 2.4 times and 2 times that of successful malls like Oberoi Mall and Select City Walk Mall in these markets. In the case of Bengaluru, the airport retail revenue stands at 0.9 times that of the successful Orion Mall in this market. In India, non-aeronautical revenue from the Indira Gandhi International Airport is as high as 70 percent of the gross revenue of which 34 percent comes from retail, food & beverage and duty-free components, thus reinstating the importance of integration of retail into the transit formats on a more pronounced basis. According to a survey conducted by the Knight Frank Research, after food & beverage, personal care (fragrances and cosmetics) and fashion apparel were the most shopped product categories while on domestic trips; whereas during international trips, it was duty free shopping for personal care followed by wine and liquor. According to their survey, in the F&B category, Quick Service Restaurants (QSR) form the major component in the top three airports in India followed by apparel, jewelry and accessories. Though the share of wine and liquor in the overall retail footprint of the studied airports is insignificant, the category takes up significant space in the duty-free area in both Delhi and Mumbai airports.

The Dynamics and the India Story
In India, the history of airport retail isn’t very old. The major turning point that gave a boost to travel retail (specific to airports) in the country was with the emergence of PPP airports. In an earlier interview to Images Retail, Saloni Nangia from Technopak had stated, “In India, the focus came only a few years ago, with the PPP Airports (New Delhi, Mumbai, Bangalore and Hyderabad) and some AAI Airports taking a lead. So the years from 2008 onwards, when the new PPP airports came up, were the starting point. The experience and business model has evolved since then.” Talking about the challenges transit retail faces in India, Nangia further stated in the same interview that transit retail, especially in airports, is not of the same scale as we see in some key transit hubs across the world. She said, “Usually passengers get to spend time in transit airports across the world which helps in increasing travel retail revenue. Indian airlines and airports have not been able to develop any of the Indian cities as an international transit hub, so there is negligible revenue opportunity there. In the domestic market, some of the larger airports (Delhi, Mumbai) have become transit airports for domestic air travel and offer a good retail option for the transit passengers. Their role as transit hubs might become lesser with many shorter haul flights being introduced by the airlines between smaller cities and with the Udaan scheme gaining momentum.”

Talking about the current dynamics of ‘Airport Retailing’ in India, Anand Kumar, Managing Director of Abra, “Airport Retailing in India is a segment that we are paying close attention to and are excited to see growth in. We are seeing airports around India, beyond the metro cities, begin to see the airport as more than just an air travel location and realize the retail and other services potential that they can offer. The biggest shift indicative of this has been airport renovations and new airports being built around India. In my home state of Kerala for example, our largest international Airport of Cochin had completed a major renovation in 2017 and received a complete facelift. This included major upgrades to the interiors of space as well as increased retail and F&B space. We have also seen major renovation and expansion, with India’s 2 busiest airports, the Mumbai and Delhi International Airports.” Based out of Dubai, Abra delivers shopfitting and joinery across Middle East, Africa and India. Kumar further adds, “We can also see the government starting to pay attention to the importance of air travel for transportation with the Modi government’s UDAN plan to develop regional airports and reinvigorate domestic travel. With these moves, there is no doubt air travel will rise in popularity for both the domestic and international audience, creating more opportunity for retailers to reach customers.”

Drawing an analysis on the dynamics of Airport Retailing in India as compared to other Asian countries, Kumar reveals, “I think the biggest benchmarks in Asian Airports would be Changi (Singapore) and Dubai Airports, as these both process the largest volume of visitors and have the most expensive retail offerings. When comparing these, we can see a significant difference in demographics and buying habits for Indian Airports. With Changi and Dubai Airports being major transit hubs and carrying higher income passengers, we see these airports having significant luxury retail offerings to match these visitors. Additionally, the primary travel in these 2 countries is international, with almost no domestic travel. India, on the other hand, has a significant domestic travel industry resulting in a wider spread of income levels travelling. The rising number of low budget domestic carriers have also allowed lower income passengers to travel within the country, with air travel becoming a viable option like never before. As a result, the airport’s retail offering should match this spread, with more budget and mid-tier brands entering the airport retail segment.”

Elaborating on the comparison further, he shares, “Another unique thing about the Indian market is the sheer size of the country. For a lot of brands, the airport may be an ideal location (also due to ease of market entry) to reach customers from all across the country as opposed to starting in domestic retail, where the barriers to entry are significant. As a result, we sometimes see international brands that only have airport retail offerings and no other domestic offerings.”

Brand Talk
The success of Hidesign’s stores at the airports has been a case study for other brands to follow. The brand currently has 20 stores at the airports. Dilip Kapur, President and Founder- Hidesign shares, “Airports have been a very exciting story for Hidesign. It is a very simple story, the customer base for Hidesign is very much a traveller, he is a global citizen, he travels for his work for his pleasure, for just learning. So given that travel is so important in our minds, to be at the airport was exciting but also we knew that our customer would be there, and we have been proven right as consistently we have done extremely well at the airports, to the point just before COVID 30 percent of our sales were coming from the airports.”

Sharing details about their foray into airport retailing, Kapur says, ‘We got into airport retail way back in 2009, as we understood the importance of the airport stores since then. We believe that the airport is a very significant platform for our brand as our ideal Hidesign customer is well-travelled and successful.” Talking about the highest selling SKUs at the airports, Kapur reveals, “Products for personal use such as wallets, shoes, laptop bags and travel bags are an easy fit and also make great gifts. Travel themed products are another great option.”

William Penn may well be called one of the early entrants in India as far as setting up of stores at the airport goes. The brand today has 6 stores at the airport between Delhi, Mumbai and Hyderabad. Pulling a page from their brand journey into Airport Retailing, Nikhil Ranjan, Managing Director, William Penn shares, “William Penn opened its first airport store in 2007 at the Hyderabad Airport – Domestic Departures. The next store was at T1D, Delhi Domestic departures. This gave William Penn a lot of visibility since it was in the National Capital. The brand has gained from the visibility at the airports since the audience at the airports is apt for the brand.”

Speaking on the aesthetics of store design specific to the stores at the airports, according to Kapur, “One of the key aspects of airport retail is that the customer whether out of necessity or simply because of the type of airline travel, the customer feels they do not have as much time as they would in a mall. The customer needs to move fast. We therefore try and make all our airport stores to be wide open, and feels no block between walking on the aisle and walking in our store makes it very easy for him to get into the store, pick up a product and carry on with his travels. We would not want this process to take more than 10 minutes.”

Engaging the Customer
Talking about customer engagement initiatives the brand indulges in, Kapur shares, “We do not necessarily do anything special at the airport simply because it is hard to do any marketing activities as security rules do not permit our teams to go in and out easily. We engage with the airport’s own social media consistently and we are talking to our customers through social media.” Elaborating on the various initiatives undertaken by his brand to engage the customers, Ranjan enlists some interesting ones that have won a lot of customer appreciation, “We have done some campaigns like Write A Letter pop-up in the Airport walkthrough area. Write a Letter is an initiative to make the passengers write letters to their loved ones instead of just texting on WhatsApp. Writing letters always had an emotional appeal and made the recipients nostalgic. Apart from this we also had a dedicated section in one of our Airport stores as a permanent feature to Write A Letter and we will deliver it at the recipient’s address. Instant personalization of products was also introduced in one of the stores which were not present at any of our stores. A customer could instantly add a name, message or logo on the product, thereby making it more special. We have also listed on the HOI app, facilitating passengers to book on App and the product can be picked from the store or in the waiting area it can be delivered to the customer. As part of the customer service, we also deliver products in the ‘Arrivals’ area.” 

Exploring In-flight Retail
The joy of shopping mid-air can be blissful provided that options given are alluring enough. No one wants to keep looking at a catalogue that has nothing better to offer than the same old pearl set or his and her wrist watch set. “The product mix has to be meaningful. Only then inflight retail can be successful,” shares Panneerselvam Madanagopal, Chief Executive Officer, Stakeholder Management Consulting. He minces no words when he talks about how airlines in India haven’t truly capitalized on the opportunity before them.

“It is just the prohibitive prices keeping the customers away. If they get their pricing strategy right they can capitalize on the passengers they are flying. The logistics and managing should be done in a very professional manner. It can become a strong revenue stream for airlines if done and managed well.” Sharing his list of airlines that can be an inspiration for other airlines, Madangopal is all praise for Emirates, Qatar and Qantas airlines. He says, “Emirates remains the undisputed leader when we talk of in-flight retail, but I am very impressed by Qatar’s offering of content and shopping catalogue. The shopping catalogue has a range of products to choose from including fine wine and electronic gadgets.” He further highlights an important category that has yet not been capitalized upon by any airlines – the kid’s wear category. “There are a lot of business travelers and they would want to go home with a gift for their children. No airlines offer things a man or woman can take home for his / her child.”


Beating the Odds
Operating stores at the airports comes with its own share of challenges. In fact ,quite a few. Ranjan candidly shares their key ones, “It is the operational challenges – one is that we would require 24 hours operation which increases the number of staff members required. The other aspect is around the security protocols to be followed both by the company and the staff members. The team has to be trained frequently; the company also has to comply with various regulations that come up from time to time. Formalities are too stringent for team members to visit and supervise the store. Billing happens in Airport POS which duplicates the work of the team as the same also needs to reflect in William Penn’s POS billing system. Most of our customers purchase for Gifting purposes and simple things like gift wrapping cannot be done as scissors and knives are not allowed to be kept. Products like Zippo lighters and Bullet shaped pens are also not allowed.”

Commenting on the most pressing challenges when it comes to airport retailing, Kapur shares, “The most pressing challenge at the airport is COVID. International airport retailing has crashed by 90 percent, domestic is still also quite iffy and is just reaching the levels of 60 percent at the moment. We do believe that domestic will steadily keep improving and come back to normal in the next few months, however we do not expect internationals to come back for at least another year and a half.”

In terms of growth for Airport Retailing in India, Kumar strongly feels that leniency in regulations of sale of certain products will definitely boost retail sales at the airports. He elaborates, “Recently, we heard news about India offering stricter liquor and tobacco regulations from duty free retailers. This comes in a country with an already tight limit of 2 litres of liquor. Regulations such as these can hamper and limit the potential of airport retail and discourage new brands from entering this segment.” He also suggests that promoting tourism in India is also imperative along with promoting business travel, “Promoting tourism and business travel is always a must that can help boost visitors to the country that will spend on travel retail. For these visitors, domestic goods and souvenirs are an important segment. A strong national airline is always a bonus when it comes to bringing in visitors. This may allow more airports to be used as transit hubs rather than final destinations and can boost tourism in the country as well. This is something India can improve on as the Air India experience leaves much to be desired.”

On the emergence of new retail strategies for Airport Retailing, Kapur aptly shares, “The original do’s and don’ts have gone by, the biggest thing is to plan your presence there for the next 1 year based on the way COVID is going.” Keeping in mind the changes being forced on businesses across genres owing to the pandemic, technology has come to the forefront across. Airport Retailing is no exception. An article in financial daily Business Standard states how at Hyderabad airport, where all retail outlets are open, fliers are being encouraged to choose from a range of digital options for making payments. The airport is enabled with the HOI app, which is a digital platform that passengers can use. The HOI app or QR codes placed across the terminal can be used to pre-order food through mobile phones. Delhi airport too has a fully integrated online food and beverage ordering platform through the HOI app, where passengers can order and receive their meals at the gate. The app is available on both iOS and Android phones and provides contactless ordering facilities to passengers.

Do’s and Don’ts of Airport Retailing
“Brands have to be selective in what they decide to sell in travel retail, it is a niche and is not to be treated as another point of sale, as in a new domestic location. They must not go in with their full portfolio, as people tend to look for novelty and travel retail exclusives, for which many brands do successfully with specific sizes and promo packs (mainly in beauty and confectionary products). This also makes way for different price points that cannot be compared with what is available in the domestic retail,” he says. “Last minute gifting represents a huge opportunity for travel retailers, when the customer might not have the time to pick up something during their hectic trip and the airport represents a last opportunity to make a purchase to take home, and hence brands must appeal to this audience with the right assortment of products. Finally brands have to make it convenient for the shopper to pick and go, as there is limited time to engage the customer or try a product and hence the merchandisers in travel retail have to be trained to manage a customer that’s in a hurry, to avoid a lost sale,” he adds.

Do’s and Don’ts of Airport Retailing – Nikhil Ranjan, Managing Director, William Penn

  • An open format helps customers to easily browse through the products.
  • Digital format of payment and receipts helps in easily retrieve data and ensures no contact payment.
  • Pricing should be consistent across the formats/stores
  • For visibility and walk-ins the store location is very important
  • A 24×7 store demands a highly alert and attentive team
  • Don’t keep hazardous stuffs for security purpose

Do’s and Don’ts of Airport Retailing – Siddharth Bindra – Managing Director, BIBA
Do’s

  • Providing easy to carry & travel proof packaging help in providing a mind registering experience for customers.
  • The staff must be well versed with the airport rules & be able to assist the customers about the same.
  • Easy & Quick Billing System is a must at airport stores as customers are mostly in a rush

Don’ts

  • The store should not hassle the customer into making a purchase, as at airports customers mostly do shopping as leisure. It creates a negative impression in minds of the customers for the brand.