Airport retailing has always been a critical element of the passenger experience, not only to serve basic convenience and dining needs but to generate non-aeronautical revenues.
For international airports, the elaborate brand merchandising and tax-incentive pricing for duty free shopping has been the traditional anchor for airport retail sales. Over the past two decades, retail components of the world’s international gateways and domestic hub airports have come to resemble regional shopping malls.
However, in the larger context beyond airports, traditional malls, shopping centres, main streets, shopping and dining places are experiencing a re-invention in response to various disruptions posed by digital innovations, online shopping, e-commerce supply chain management, generational shifts and globalisation.
Almost anything can be purchased from anywhere that has an internet connection, and products are delivered to your door in less than two days.
At the same time, the ‘Sharing Economy’ has stimulated a paradigm shift in how we communicate, exchange information, seek travel and accommodation, move around and view the world.
Everything from personal information to government news is immediately available via Facebook, Twitter, YouTube and Instagram. And in many cities, mobility is just a click away with Uber, Lyft and a myriad of ride-sharing services that are revolutionising how we move around.
Fast-paced change has already shaped the air travel experience ranging from how people purchase air tickets, travel to the airport, and select accommodation using online booking sites, to selecting restaurants recommended on Yelp or Trip Advisor.
The change we’ve experienced in the past decade will seem snail-paced when compared to the change we’ll experience in the next decade. To sustain and grow non-aeronautical revenues, airport retailing will need to adapt to this change and embrace the following fundamental trends.
– Online shopping and omni-channel retailing
Consumer purchases are increasingly being made online from Amazon, Alibaba, eBay and the omni-channel platforms of retail operators, particularly by the Millennial consumer segment.
Global e-commerce retail sales have consistently been growing over the past five years at an annual rate of just over 23%, now accounting for 12% of all global retail sales. In China, over 23% of retail sales are via online purchases. By 2023, global e-commerce retail sales are forecast to reach 20% of all retail sales.
With this proliferation of online shopping, retail manufacturers, as well as bricks and mortar retail operators have recognised the importance of ‘omni-channel’ shopping platforms for offering goods through multiple retail channels.
The goal is to get their brands and products in front of consumers – recognising sales may come later – either through bricks and mortar shops or virtual online purchases. Airports will increasingly become targets for retailers seeking brand exposure in support of growing omni-channel sales.
As well, airside and landside developments at and around airports are critical elements of multi-modal logistics, supporting global retail supply chain management, as evidenced at the FedEx global hub at Memphis International Airport (and its relationship with the BNSF Inter-Modal Rail Facility), new 2.5 million square foot ‘Project Quattro’ e-commerce fulfilment complex at Charlotte Douglas International Airport (and its connectivity with the Norfolk Southern Intermodal Rail Facility), and evolving three million square foot Amazon Prime Air Hub at Cincinnati/Northern Kentucky International Airport.
– Personalised shopping
A parallel trend involves shopping behaviour by younger generations shifting away from international brands and towards ‘personalised shopping goods’ they identify with and wish to participate in.
With the advent of new manufacturing technologies (including 3D printing) and greater efficiencies in logistics, consumers are increasingly co-creating the products they buy, selecting specific features, colours and design elements. This unique product can then be manufactured and shipped to the customer or manufactured real-time on-site at a store.
‘Ministry of Supply’ out of Boston is an example of personalised shopping, which features ‘3D Knitting’ technology to make customised clothing. Airport retailing could benefit from personalised shopping, by offering passengers the opportunity to design and purchase personalised products, including picking-up these products at their arrival airport or having them delivered to their home or office.
– Showcasing and pop-up retailing
As part of omni-channel retailing, brands are seeking to showcase their products through physical incarnations that reflect their values, for everything from consumer electronics and clothing to automobiles.
Many consumers are visiting ‘showcase stores’ to view and try products, then purchase the goods online, having them delivered to their homes or offices. Showcase gallery concepts are emerging whereby products cannot be purchased and taken from the showcase, but rather they are ordered and delivered online, often using virtual reality technology.
Similar to showcasing, duty free shops, established retailers and new brands are embracing pop-up concepts as temporary installations that are ever-changing with new concepts and products.
Indeed, some new shopping centres have evolved purely as pop-up showcases. In the Middle East, for example, IKEA has created a pop-up store of approximately 3,000 square feet, which showcases a selection of the items available through IKEA’s online and catalogue channels, using the pop-up space as a gateway to the IKEA brand for markets that may not have a full-scale IKEA store.
With exposure to an ever-changing abundant captive consumer audience with preferable demographics, airports are an incredible location for showcasing and pop-up concepts.
– Culinary exploration and the third place
Food and beverage (F&B) is growing rapidly, becoming the dominant driver of retail places. In fact, F&B is shifting away from chain restaurants and towards unique local concepts, food trucks, culinary incubators, food halls and pop-up dining experiences.
Over the past decade, food and beverage has absorbed a larger share of commercial space due to the limited growth of traditional bricks and mortar retail shops. In the USA, F&B saw 4% average annual growth between 2000 and 2015. And according to the Urban Land Institute (ULI), restaurants account for almost 50% of new retail space in the USA, up from 33% in 2009.
Chain restaurants are giving way to unique local concepts as younger generations prefer localised dining experiences, knowing the source of the food, how it’s made and its story.
This intrigue with F&B includes the proliferation of craft brewery and micro distillery concepts offering small-batch curated products that are constantly changed-up. As a result, restaurants, cafés and F&B concepts have become social hubs referred to as the ‘third place’, whereby the public and private realms are merging, resembling kitchens and living rooms.
Airports play an important role for showcasing local F&B concepts. With the rapid growth of pop-up concepts, airport dining is already transitioning from traditional food courts and chain restaurants to ever-changing showcases of local up-and-coming food concepts, including food trucks stationed within airport terminals, as experienced at the ‘Food Truck Alley’ at Minneapolis-St Paul International Airport’s Concourse E.
Similarly, a ‘Deluxe Burger Bar’ recently opened in the Domestic/International Departures Lounge of Edmonton International Airport featuring a 5,000 square foot restaurant, patio and bar offering customised burgers and a variety of local beverages.
Deluxe Burger Bar also operates the DLX2GO quick serve take-away window, which serves the pre-security check-in (landside) terminal area.
– Collaborative workspace
Already constituting 35% of the workforce, Millennials will soon dominate the labour pool, transforming the nature of workspace.
Millennials, representing the majority of employees at next generation companies, demand amenity-rich collaborative workspaces involving connected technology, dining alternatives, social spaces and fitness facilities.
Increasingly popular new workplace formats include combined co-working, F&B, event and tech demo space designed to incubate innovation.
Outside of airports, there is an increasing blur between uses, with the rise of mixed-and-multi-use development. WeWork’s bespoke concept of fusing co-working, start-up incubators, events and technological demonstration space, provides a new type of anchor for shopping centres, including Westfield’s San Francisco Centre on Market Street in Downtown San Francisco.
– Outlet shopping
After e-commerce, ‘Outlet shopping’, whereby retail brands offer their products at reduced prices for certain product lines, represents much of the new retail space, particularly in North America.
Typical retail outlet shopping centres are unenclosed, featuring 230,000 square feet to 400,000 square feet of brand shops (predominantly apparel) on sites of 30 acres to 40 acres.
Outlet shopping centres have recognised the opportunities for being situated adjacent to airports, as they derive their customers not only from a local region but are tourist destinations. Over the past four years, outlet shopping centres have been developed adjacent to Chicago O’Hare, Edmonton and Vancouver airports.
The McArthurGlen Designer Outlet Vancouver International Airport opened in 2015 with its initial phase of 70 shops in 240,000 square feet. This project was created as a joint venture between Vancouver Airport Authority and McArthurGlen (a European and North American retail developer/operator) and will soon open its expansion adding 84,000 square feet.
Similarly, the Premium Outlet Collection at Edmonton International Airport opened in 2018 with 100 shops in 430,000 square feet (with an ability to grow to 585,000 square feet). This project was developed by Canadian-based retail stronghold Ivanhoé Cambridge in partnership with the world’s largest retail developer/operator, Simon Property Group, and the airport.
– Authentic experiential retail
In response to the threats posed by e-commerce and shifts in consumer behaviour, many retail centres and stores are shifting from simply distributing products to curating remarkable experiences that resonate with customers.
The recent opening of the Jewel development at Singapore Changi Airport (See page 25 for more information) represents the pinnacle of creating an “authentic natural experience”.
The $1.25 billion Jewel project was developed as a joint venture between Changi Airport and Capital Land Malls Asia, and features 280 retail and F&B outlets, 11 cinema halls (including an IMAX theatre) and a 130-cabin YOTELAIR hotel, built around the world’s tallest indoor waterfall, five dramatic gardens and multi-level green spaces over 10 floors.
This 1.46 million square foot multi-use complex sits strategically between three of Changi Airport’s terminals and its MRT Airport Rail Station. The Jewel symbolises the innovative direction that airport retailing is taking as we look to the future.
Airport retailing will continue to evolve at an accelerating pace as the trends and concepts occurring in retailing overall make their way into airport terminals and landside areas.
Recognising their involvement in supply chain management of bricks and mortar, as well as online retail distribution, airports will increasingly have an edge for quickly bringing new concepts and products to their passengers and regions.
Airport retailing will need to be flexible to support ever-changing passenger demands and provide refreshed travel experiences by employing showcasing and pop-up concepts.
Airport retailing will increasingly need to be local and authentic, mixing natural and cultural experiences paradoxically with next generation technology, to offer a balance of natural and virtual environments. As demonstrated by Jewel Changi Airport, such places will be enjoyed not only by airport passengers but as destinations for broader audiences.