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RETAIL/F&B Last modified on May 17, 2010

Worth the effort

Retail innovation can boost revenues and customer satisfaction levels, writes Kevin Rozario.

There’s nothing like a downturn to sharpen the mind. This is especially true at airports where shrinking passenger numbers have led to a double whammy of smaller aeronautical revenues and less retail spending.

However, it has also been an opportunity to think more creatively about the millions of passengers that still cross the departure lounge daily – and figure out how to make them spend more.

Words like ‘retailtainment’ and ‘contentainment’ have even begun to be bandied about by retailers and airport authorities alike as they look to increase the appeal of their retail offerings to the traveling public.

But what do these new buzzwords mean? On opening, Terminal 5 at London Heathrow offered some insight with retailer, World Duty Free, revealing captivating installations such as its Art Wall and Bar 5. The former is a series of store-height, non-symmetrically spaced LCD panels used for brand or store communications while the latter is a cocktail bar whose central, over-sized chandelier that changes colour acts as a magnet for passing passengers.

On the level above, Harrods’ somewhat space-age and open format design for its fashion and accessories anchor store is an inviting space for passengers to browse.

Store design is taking its proper place in airports as operators try to enhance the retail experience. In December, German operator Gebr Heinemann re-opened its flagship store at Frankfurt’s Terminal 1B. The concept, which will eventually roll out into Heinemann’s estate, also encapsulates a ‘wow’ factor in that, among its features, is a section for local and regional products that, for each store, will be locally designed in a head-turning way, and prominently positioned.

Meanwhile customer service desks are appearing in all Heinemann stores and this, coupled with the Heinemann family name on its store fascias for the first time, establishes an intrinsic link between service and the company name.

Podiums called ‘Heinemann’s Choice’ continually put on special promotions, demonstrations and events. For example, handmade Swiss chocolate brand Läderach was being sampled on opening and exclusively being sold in the channel by the retailer.

Beauty houses say that staging events like this typically triple brand sales during a promotional period, which is why big hubs like Heathrow, Hong Kong and Dubai tend to run them back to back year round. Zürich Airport has been a strong supporter of enhancing the customer service experience. Marketing and real estate chief commercial officer, Peter Eriksson, told Airport World: “The key for future success is a ‘seamless care’ approach; monitoring and improving the whole travel experience for our guests, from the moment they decide to travel until they reach their destination, and back again.

“We need excellent services for all their needs so that they are in a good mood when they visit us. A feeling of wellbeing automatically triggers more consumption. The airport visit should be remembered as the best part of the journey – no more, no less.”

This ideal is probably shared by many commercial departments, the problem is delivering it. It is difficult, for example, for the security segment of this process to be anything other than an ordeal and, given that the retail offer comes immediately afterwards, stores can struggle to bring out that good mood Eriksson mentions.

Dufry, one of the world’s biggest travel retailers, has just begun a company-wide initiative to do exactly this through a change in service culture. This year it introduced a programme called Dufry plus1 at Sharjah Airport in the UAE, focusing on the ‘plus’ activities that sales associates can provide to improve the customer experience.

The scheme will roll out worldwide and represents a big step as it is the first global project from its human resources team. The Sharjah pilot saw 10 managers become qualified trainers in February, able to deliver the Dufry plus1 philosophy to sales associates.

It will be interesting to see just how such an initiative can directly influence sales, especially in 2010 when conversion rates are under such scrutiny. A study at Manchester from Eye Tracking, part of EyeCorp (see above), shows that 61% of flyers are open to new products and services while at the airport. With a receptive audience, the challenge is to harness that openness.

In Dufry’s case the belief is that by implementing a training programme now, it will have a head-start in converting receptive browsers to buyers. Global marketing manager, Javier Gonzalez, says: “It is important to focus on staff development to maximise every sales opportunity. As passenger numbers increase, Dufry will be in a better position to take advantage of accelerated growth.”

Training is one piece in a much bigger jigsaw. Another is that of compelling in-store entertainment. While bigger retailers have begun to step up their activities here, brands have generally been more creative in driving the ideas and content behind arresting and appealing events.

Leading the charge have been beauty, wines and spirit houses. For example, last autumn, Spanish fragrance house Puig teamed up with Aldeasa to organise live music concerts by rock band Lewis Larke at a number of Spanish airports to promote the limited-edition fragrance, Paco Rabanne Black XS Live Sound.

Meanwhile L’Oreal Luxury Products is ready to roll out an ambitious animation at global hubs called the Perfume Lounge that will include its full fragrance portfolio. At its core is a new electronic tool, the Perfume Coach, which allows passengers to select visual lifestyle cues such as cars, hotels or fashion that eventually lead to fragrance recommendations. The company claims the concept will encourage conversation and help in particular with gift purchases.

Elsewhere drinks giant, Diageo, wants to double liquor category sales in travel retail to $12 billion over the coming five years. Diageo’s global travel and Middle East managing director, Phil Humphreys, says: “Numbers may be down – but global traffic was still almost five billion passenger journeys last year. Our industry’s penetration and conversion rates should be under intense scrutiny regardless of traffic trends. The quality of the retail experience is foremost in the shopper’s mind and retail customer service is one of the foundations of that experience.”

Humphreys believes shoppers should not have to lower their expectations simply because they are in an airport store. Diageo therefore ensures its sales teams are well-trained in understanding its portfolio, from product awareness to the heritage behind each brand. This counts for everything when selling a $3,000 Johnnie Walker Blue Label ‘John Walker’ edition. Ultra-premium lines have been in demand even in the downturn.

Notes Humphreys: “I confidently expect half of future category growth to come from premiumisation.”

To do that will require a marked lift in the experience that passengers receive. For example, for The John Walker launch at Abu Dhabi International Airport, Diageo created a private luxury ‘experiential’ area styled in the blue and gold of the Johnnie Walker Blue Label family.

Likewise, when Chanel introduced its Les Exclusifs de Chanel at Frankfurt Airport, normally reserved solely for its branded boutiques, sales of the €190 bottles soared. The creation of a stylish pop-up black and white boutique within Gebr Heinemann’s store with dedicated staff ensured a doubling of turnover compared to a Chanel promotion in the same period the year before, despite fewer passengers in the terminal.

But it’s not just excitement around the prestige end of the business that is driving revenues. At Dubai International Airport, the top location for travel retail sales globally, operator Dubai Duty Free (DDF) managed to increase its sales in 2009 by 3.8% to $1.14 billion. And, despite the hub having luxurious brand selections, one of its principal tactics remains the price-off.

In 2009 it ran ‘20% discount days’ for 17 Thursdays from July to October resulting in watches, pens and lighters followed by perfumes and cosmetics becoming the most consistent categories to see percentage sales increases.

During its 26th Anniversary Sale, DDF offered 25% off shop prices plus massive discounts of 30-50% in fashion. Acting manager – purchasing and research, Saba Tahir , enthuses: “This generated volume sales. The shop floor was jam packed with special offers that allowed customers to make value purchases.”

Overall, it looks as though the lip service that was being paid to the travelling consumer in the past is being transformed into more tangible services and experiences that passengers can put a little more faith in.

If this translates into extra revenues per head for airports, then retailers, brands and operators can regard their efforts as a success; if not, it will be a stark reminder that they are failing to excite passengers with their offers and their service – and those potential customers will continue to walk on by.

The path to purchase

Strategic concourse advertising is the latest weapon in the battle to put retail foremost in the minds of passengers. It allows retailers to increase penetration by directing information about in-store services or offers to those who might otherwise miss them.

Eye Fly, the airport division of signage and media specialist EyeCorp, has built relationships with brands and retailers such as Biza, Gucci Parfums, The Nuance Group, Wine Selectors and WH Smith that want to exploit the so-called path-to-purchase in every passenger’s journey.

Last summer at Manchester Airport in the UK, The Nuance Group ran a campaign to promote special offers and drive affluent flyers into the Temptation stores in its Terminal 1, which sell a range of luxury/fashion sunglasses, watches, fashion and accessories. The aim was to increase sales in peak periods by using Eye’s Eyelites, the equivalent of digital posters, in the departures area.

Nuance airport manager, Scott Thomas, says: “The campaign gave an additional boost to our retail presence there and we saw a sales uplift of 7% across our fashion and accessory ranges. We will certainly look to the medium to support our summer sales push this year.”

Also at Manchester Airport, WHSmith ran a similar campaign across the airport’s terminals to promote its ‘2 for £20’ paperback books offer and the result was “a good increase in penetration”, according to the firm’s travel retail marketing manager, Jacqui Copas.

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