Commercial revenues contribute an increasingly valuable and ever growing proportion of an airport’s income. Indeed, the latest figures for UK airports show that in 2010 the split between revenues earned from aeronautical and non-aeronautical related activity was 55.6% to 44.4%.
And research also reveals that despite a third consecutive year of falling passenger numbers in the UK, overall airport revenue has increased by 29% to €4.2 billion per annum since 2006.
Yet before we congratulate ourselves on a retailing success story, a closer look at the data tells us that that increase is down to aviation revenue growth. So commercial revenue is either the weaker partner, reflecting a general European and North American retailing recession story, or it is the Cinderella story of airport revenues.
In the next 20 years, the Asia-Pacific region is predicted to overtake Europe and North America as the largest market for air travel. China is already emerging as the world’s single strongest aviation market, which is unsurprising considering that at 300 million, its middle class, is approaching the size of the entire US population.
Airport commercial growth sits at the centre of a perfect Asian storm: rising passenger numbers, rising wealth and rising consumer expectations. There should be no Cinderellas here, only commercial opportunity.
Whatever your region, the commercial opportunities are there for the taking, a fact that will not be overlooked by prospective investors who will be looking for evidence of your commercial revenue growth strategy and your commercial capability.
So how would you describe your current commercial offer? Is it relevant to your customer base? Is your commercial offer attractive, exciting and well executed?
Is the service customers receive at the airport as good as or better than the service they experience in downtown shopping centres? Does it motivate passengers to get to the airport earlier or indeed choose your airport over any other?
There are many great examples of airport retailing, of course, and although it is impossible to highlight them all in this article, I would like to mention a few of my favourite examples.
They include Birmingham Airport’s wall of TV screens that drive product penetration according to flight destination; Sydney’s online duty free shopping experience that allows customers to shop before they arrive and collect at the airport; the ‘Vizzit’ concept at Amsterdam Schiphol that targets business passengers near the boarding gates; Auckland Airport’s award winning retail design; and, of course, Copenhagen Airport’s innovative approach to wayfinding and the development of a new offer.
All these are great examples of innovative ways to attract and target customers, but are largely not representative of the whole airport consumer experience. A quick trip round your local supermarkets should reveal the latest trend of looking to real markets to inject personality into their offer.
In the same way, we believe that airports need to look to downtown stores or the High Street to inject customer magnetism into their offer.
Before we get carried away with wacky new innovative ideas, the foundations need to be in place. The best High Street retailers do the basics well and like most things that on the surface seem simple and obvious, they put a lot of work behind the scenes into getting it right.
They are meticulous in how they fulfill the following retail essentials:
• Product and service availability
• Customer service (relevant to identified customer needs)
• Customer understanding of what’s available
• Performance management
Product and service availability
A recent survey of HR directors by the UK’s Egremont Group revealed that one of the key initiatives undertaken by Tesco in recent years was moving hours to match the trade.
Data on customer and sales flow drives stores’ productivity budgets – they know how much money can be saved by taking even a second off the checkout process so matching staff availability to customer demand is essential.
Obviously opening hours are also a key driver of availability, and this is something which supermarket chain Morrisons has tackled under the leadership of Dalton Philips. Customer research revealed that the thing customers most wanted was longer opening hours.
Airport retailers clearly need to plan their opening hours around flight timetables ensuring that relevant offers are available for the relevant customers.
Empty shelves, abandoned product trolleys in the aisles, core products out of stock lead to lost sales and poor customer satisfaction. Often the reasons for poor availability are not identified or the responsible party has not been part of generating the solution. Reasons could be staff availability, in-store monitoring, storage issues or fulfilment processes.
The best retailers adopt a factory/theatre approach – for instance, a seamless approach to delivering a flawless offer with enormous complexity behind the scenes matched with a stimulating shopping experience.
This is also about making products available, which are tailored to your passenger profiles. For example, many of the UK grocers have local ranges reflecting the local population mix. The same should be done in airports to reflect the changing passenger profiles.
Customer service (relevant to identified customer needs)
Customer segmentation has long been a core part of retailing and a driver behind all aspects of retail operations from category management to staff training to outlet concept design to customer service.
Segmenting and profiling your customer base, at a macro level, helps airline operators to decide on the space and brand mix and at a micro level and helps operators and retailers alike to tailor their customer offer and service.
Customer insight conducted by supermarket chain, Asda, revealed that a slick checkout process was more important to them than staff assistance to find products. Consequently, Asda increased the number of staff trained on the checkout and adjusted staffing to reflect this customer need.
Disney’s ‘cycle of service’ is a great example of their focus on customer service. This approach can be used to look at all aspects of a customer journey, to highlight at each step along the way, how a ‘tragic’ experience can be translated into a ‘magic’ experience.
It was as a result of this that Disney introduced entertainment whilst customers were queuing – where queues could not be avoided they tried to make the experience as enjoyable as possible.
Apple has greeters in their stores who can direct customers to the right part of the shop and they have mobile checkout staff that can take payment from you anywhere in the store.
Shopping malls have crèche facilities, which are known to have a positive correlation with dwell time and average spend.
The Selfridges personal shopper experience could be translated to the airport by having someone buy all of your essentials while you relax in a full service catered outlet. Look to the High Street/downtown stores and you will find many more examples of customer service, which could be translated to the airports.
Customer understanding of what’s available
Retailers do this through loyalty schemes, promotions, signage etc. At the airport, a combination of better wayfinding and a central information desk fulfils part of this objective.
Ongoing trials at Manchester and Luton airports of holographic security staff could be extended to holographic lounge staff who inform passengers of what’s available and where to find it.
Decent wayfinding is critical to the customer experience and airports like retailers should make their offer as navigable and as clear as possible.
Having a balanced set of performance measures linked to the overall category and commercial strategy which all staff can relate to and influence will have a tremendous impact on performance.
This is particularly the case if staff have been trained in the skills to recognise and resolve performance issues. Targets should cover finance, operations, customers and staff, and should include measures such as: passenger conversion rates, spend per passenger, and penetration, amongst others.
UK supermarket giant, Tesco, cites the use of the balanced scorecard as core to their success.
Crucial in an airport is increasing the time available to shop, and this is where the end-to-end consumer experience needs to be evaluated.
Mapping out the passenger journey will identify barriers to shopping and highlight opportunity areas but this is only effective if done as a collaborative exercise between all those who impact the passenger journey.
The commercial offer is not just at the departure lounge – mobile vending offers can be targeted at business passengers heading straight for the gate as well as the low cost airline passengers who need to buy food and drink on the flight.
And the offer for arriving passengers and the offer landside is also part of the mix, although the time available to splash the cash in all of these areas is impacted by the non-commercial aspects of the passenger journey.
A presentation by Egremont at a recent Retail Week conference talked about the concept of ‘retail-tainment’. It suggested that the High Street will increasingly become a place that needs to offer entertainment, theatre and excitement.
Put another way, it will become a place to socialise, to meet and be entertained – think the Roman forum but with technology.
Disney’s new Oxford Street store with its fairy castle built around a staircase certainly appears to embrace this philosophy, and is quite unlike any other outlet in London’s busiest shopping street.
Airports would be well advised to also embrace this trend as they do, after all, have a captive consumer audience crying out for a mixture of entertainment and retail.
Retail is an exciting place to be whether on the High Street/downtown stores or at the airport. New technological developments such as the Adidas interactive product wall or Morrisons’ touch screen wine selector or White Stuff’s interactive changing mirrors create new possibilities to delight customers and to increase sales per passengers.
A great commercial offer is about getting the basics right and creating excitement and engagement. Whether you are designing your new departure lounge, reviewing partner contracts or managing current performance, your commercial strategy needs to inform your approach to execution and excitement.
There is though, an elephant in the room, or maybe more aptly, a Concorde in the lounge, as experience tells us that getting Cinderella to the ball requires a strategic retailer/operator relationship.
A transactional, landlord/tenant, adult-child, short term financial gain focus will yield mediocre unsustainable results.
A longer-term, strategic and trusting partnership based on a shared vision, supported by shared data and capabilities will yield far greater benefits. For many, that is a significant culture shift, but then nobody said this was going to be easy.
About the author
Andrew Morris is director of the Egremont Group, a management consultancy specialising in retail, travel and leisure. He can be contacted at
AIRPORT WORLD/AUGUST–SEPTEMBER 2011