To some degree, the quality of the retail offering at an airport can be judged by the brands that are drawn to it and want to set up shop there.
Almost a decade ago, Terminal 3 at London Heathrow was described as ‘Bond Street at the airport’ when it attracted a slew of prestige labels such as Chanel, Gucci, Cartier and Zegna.
In 2008, the Armani Group chose Hong Kong for its first Giorgio Armani airport store, having tested the waters with a series of Emporio outlets in other hubs, while brands such as Prada and, most recently, Ralph Lauren have also entered the channel.
The most impressive airport ‘first’ of all is luxury conglomerate, LVMH Moët Hennessy Louis Vuitton’s choice of Incheon for its debut Louis Vuitton airport store.
Incheon’s retailing and passenger profile have attracted LVMH and, if all goes to plan, the store – LVMH is working in conjunction with travel retailer, Shilla Duty Free – will open later this year.
Luxury brands are rigorous when it comes to choosing locations. LVMH spurned airports for years, as did Giorgio Armani before it, because retail offers are invariably ignored if they might negatively affect brand image, but the fact that both prestige players are now onboard suggests that airport shopping environments are improving.
But it is passengers who ultimately determine the success or failure of stores and whose opinions matter most to airports.
And while shopping is a diversion for travellers, it is an increasingly important revenue source for airports.
According to the latest edition of ACI World’s Airport Economics Survey, industry revenue declined by roughly 2.0% in 2009 compared to 2008, reaching $95 billion after extrapolation from ACI data from 646 airports representing about 67.5% of worldwide traffic.
Aeronautical revenues declined by 2.5%, while non-aeronautical revenue fell by 1.5%. This means the latter gained share, rising to 46.5% of industry revenue in 2009.
ACI director general, Angela Gittens, says: “During the downturn the diversification of airport revenues cushioned the impact of lower passenger and freight volumes.
“Non-aeronautical revenues critically determine the financial viability of an airport as they tend to generate higher profit margins than aeronautical activities, which are typically cost-recovery only or operate at a deficit.”
The margin issue is important when passenger numbers dwindle as experienced during the global recession. In such circumstances, gateways that have passengers on their side with respect to retail, and who can market their offers well, can increase per head spending from existing passengers to offset declines elsewhere.
To some degree this is what happened in 2009. While non-aeronautical revenues declined by 1.5%, revenues from the core commercial areas rose by 3.0% – despite the passenger traffic decline that year – driven by retail (+2%), real estate (+10%), car rental concessions (+9%) and food and beverage (+7%).
ACI says: “Performance in the retail and real estate sector helped to protect the bottom line of many airports in a difficult year.”
Excellence in the retail offer drives not just sales but reputation, and that can be seen in the examples we have highlighted from Toulouse, HongKong, New Delhi and Jersey airports where retail with relevance to the passenger profile has boosted both sales and popularity.
Even in Ireland’s stricken economy, the home grown ‘The Irish Whiskey Collection’ concept at Dublin Airport’s new Terminal 2 has wowed passengers enough to push Irish whiskey sales 25% above passenger growth.
Head of retail, Gerry Crawford, describes the store as a “shrine for whiskey lovers”, with a design concept that looked to the fashion and beauty categories for inspiration.
He says: “The feedback from the travelling public has been excellent and they are very enthusiastic about the range, outlet and service levels. All have combined to increase transactions and customer average spends.”
At Canada’s Vancouver International Airport (YVR), passenger satisfaction levels in 2010 were at their highest (90%) in the airport’s history. Christopher Gilliland, manager for retail sales and service programmes, has no doubt that the gateway’s retail offering played a major part in the airport’s success.
He says: “Our retail programme ranks as one of our top ‘best predictors’ of overall customer satisfaction. According to our research, international travellers are looking for a variety of speciality products including luxury goods, local gourmet foods and memories from Canada.
“We responded with a retail offer that surpasses anything offered by our competitors. This not only drives satisfaction, but clearly differentiates the advantages of flying through YVR. Our enplanement sales are among the best in North America.”
But at Fraport, the operator of Frankfurt Airport, senior executive manager for category management duty free, Christian Sueltemeyer, notes that a balancing act must be struck.
He says: “People come to airports mainly to catch a plane and not to shop. That makes the situation somewhat different to any other shopping location; impulse becomes much more important. For passengers to be open to the commercial offer they need to have a smooth journey through the terminals and not have to queue for hours, lose their orientation or get frustrated because they feel that they are being pushed around like cattle.”
ACI’s Airport Service Quality (ASQ) programme director, Craig Bradbrook, agrees. He says: “We know from the retail revenue experience that the traveller who is satisfied with the essential services and waiting times has a greater propensity to take advantage of additional services, be that lounges, WiFi connections, spas or duty free.”
There is no doubt that a good retail offering can boost customer satisfaction levels, create a more favourable impression of an airport and raise revenues. Below are a handful of examples of offerings that have helped enhance an airport’s reputation.
Uisge Beatha – Delhi–Indira Gandhi International Airport
A specialist single malts concept at the airport’s new Terminal 3 called Uisge Beatha (Gaelic for ‘water of life’) is part of a retail offer spanning more than 4,000sqm.
Operated by Delhi Duty Free Services, a joint venture between DIAL (Delhi International Airport Limited), IDFS (Indian Duty Free Services) and ARI (Aer Rianta International), Uisge Beatha includes whiskies from around the world, but Scotch brands dominate.
They come from the four malt regions: Highland, Speyside, Islay and Lowland and are merchandised by region and style within each region, with detailed tasting notes for guidance.
Uisge Beatha has a seated lounge area to enable passengers to have tastings and receive specialist product advice.
In the first three months of opening, malt whisky sales quickly rose to account for 35% of the premium whiskies segment.
“The concept broke the mould. Rather than the traditional method of simply displaying whisky, we have endeavored to create an environment conducive to the discerning imbiber which allows participants to learn, experience and ultimately taste, taking away with them a unique experience and hopefully a nice bottle of malt whisky!” says Nicholas Goddard Palmer, CEO, Delhi Duty Free Services.
“It’s a wonderful destination space that is continuously evolving. We have seen consistent increases in footfall as the concept is interesting for the novice and the collector alike. This environment has also encouraged traditional blended whisky drinkers to trade up.”
World Duty Free, Jersey Airport, UK
The airside departures hall went through a total refurbishment last year, which included a new World Duty Free duty and tax free shop with an increased footprint of 30% and a walk-through design funneling passengers through to the gates.
The tobacco presentation was better executed and support from local food suppliers enabled extra sampling activity and the introduction of strong value promotions.
The watches category was enhanced by adding wall-mounted glass cabinets and brands that included DKNY, Fossil, Guess and Citizen. A sunglasses wall is also a key fixture in a new luxury area.
“We have seen penetration increase by over 5% due to the new format,” says a WDF spokesperson. “Sunglasses sales from Gucci, Maui Jim, Prada and Police were above expectation in the first year and the beauty area is another big success.
“From our perspective, the refurbishment has encouraged customers to dwell longer in the store as the surroundings are more enjoyable. All categories have performed well above passenger numbers especially tobacco, food, watches and sunglasses.”
East Hall, Terminal 1, Hong Kong International Airport
A series of projects have been carried out in airside departures since 2003. In fiscal 2003/2004, 7,000sqm of retail was created and from 2008 to 2010, an additional 2,780sqm shopping area ensured a wider assortment of brands.
In January 2010, the North Satellite Concourse was opened housing 10 new shops and two new catering outlets. Meanwhile in the arrivals area, a reconfiguration allowed for 1,100sqm of extra retail space (double the original size).
The retail mix includes travelling essentials, audio-visual products, massage services, packaged food, a coffee shop and restaurants, as well as the world’s first Martell Experience Boutique offering special collector editions plus exclusive tobacco and liquor products in a deluxe setting.
On the back of travellers from the China Mainland, the gateway’s annual passenger throughput passed 50 million for the first time. The traffic has pushed up retail demand but HKIA says its revamps have also “brought about an increase in footfall and penetration rate”.
According to a retail tracking survey in October 2010, 51% of visitors went into the shops.
“On average, each airport visitor purchased one to two product categories and the overall conversion rate is 59%, meaning about six out of 10 browsers bought something in HKIA retail outlets,” adds the spokesperson.
Retail sales at Hong Kong International Airport have recorded a double-digit increase per annum since 2003.
La Place, Toulouse-Blagnac Airport, France
In March 2010, The Nuance Group opened 700sqm of retail in the new Terminal D, part of a two-phase development, with the second phase opened this March.
Called La Place, the shopping area is designed like a village square and features 200sqm dedicated to segmented liquor, tobacco and fine food areas, the latter having a strong local touch in terms of fine food, as well as some 80 different wines from the south-west of France. It also houses the world’s first Armagnac concept called Armagnothèque.
Opposite, there is 300sqm shop dedicated to beauty, a L’Occitane shop-in-shop and a distinct men’s area grouped around a skincare bar.
Completing the first phase is Tentation, featuring sunglasses, jewellery and watches (86sqm; a temporary Spirit of Toulouse destination concept (54sqm; and a SWIFT gate shop (50sqm) offering bestsellers.
From this March, the second phase houses a 200sqm Spirit of Toulouse store, the first ever Airbus shop-in-shop; Attitude, a designer fashion and accessories store; and Sound & Vision electrical goods (a newly-developed concept).
“We have been pleased with the customer feedback and seen a positive impact on sales. This is linked to the opening of the new terminal itself, but also based on the breath and range of products on offer, which is considerably more extensive than the previous offering,” says Adil Raïhani, director for sales and operations for Europe at Nuance.
“In particular, the localised elements such the wines and our Spirit of Toulouse store have been very well received. As a result we have deepened the local product range: Spirit of Toulouse, for example, has expanded from 50sqm to almost 200sqm.”
Nuance anticipates further good responses with the Airbus store-in-store concept now in place.
Airport World 2011 - Issue 2