Shopping on the fly may be part and parcel of the airport experience, but the spend tends to be confined to the departures hall, when passengers have the most dwell time and purchasing power is at its highest.
The fundamental reality is without doubt the key reason why shopping on arrival hasn’t historically been a primary focus for airports.
Brian Woodhead, London Heathrow’s retail concessions director, even goes as far to claim that passengers aren’t “naturally programmed to shop at the end of a long-haul flight”, although his frank admission of the need to change this mindset hasn’t stopped the gateway from opening a handful of arrivals stores.
“People are not looking to spend a lot of time on arrival here, as they’re more in a functional mindset,” says Woodhead. “They tend to look for immediate essentials, whereas in departures, it’s more about things that they desire. But as a global hub airport, our customers’ needs may be different to those at a point-to-point airport, for example.”
London Heathrow’s five arrivals stores represent a very small part of the commercial business and focus on last-minute gifting items, such as confectionery, perfumes and duty-paid liquors, he says.
Elsewhere in the UK, Manchester Airport’s arrivals offer is equally limited. The attention turns back to the departures hall, where €40 million has been spent on an impressive airside shopping facility in Terminal 1, including a walk-through World Duty Free (WDF) store.
On the arrivals side, the thrust has been to simplify, rather than expand the retail offer, with strong price messages and single price points, explains Richard Hill, retail manager, commercial development, Manchester Airport.
“We have trialled watches and jewellery for arrivals, but it’s a considered purchase, and isn’t a big market,” says Hill. “The arrivals experience is very much on instinct. It’s about putting the key brands in people’s faces and at great prices.”
However, travel perks at UK airports aren’t so competitive nowadays due to customs regulations, with duty free prices abolished for liquor and tobacco in 1999 – a regulatory change that only applies for UK passengers travelling within the EU. Only perfume and confectionery can be sold at tax-free prices, putting a dampener on the arrivals shopping experience, as the ‘duty free’ concession only qualifies when goods are exported.
While regulations vary between countries, passengers arriving at many airports outside the EU traditionally enjoy full duty free prices. This is where arrivals shopping has, in many ways, become an essential and growing source of non-aeronautical revenue, and a valuable contributor to the travel experience.
In 1994, retail operator, Aldeasa, opened its first arrivals store in Lima, Peru, and has since grown the concept through Latin America and into the Middle East. Today 30% of the passenger-spend at Jordan’s Amman–Queen Alia International Airport is on arrival, according to the retail operator.
The Middle East has seen spectacular growth in the duty free market over the years and Dubai International Airport (DXB) has been running arrivals outlets at its three international terminals since the mid-eighties.
Sales account for a steady 10% of total business today, says Colm Mcloughlin, Dubai Duty Free’s managing director. The retail operator turned over $1.1 billion last year in duty free sales and clearly recognises the arrivals opportunity.
“We are looking at ways of increasing spend per head for arriving passengers – particularly in Terminals 1 and 3,” says Mcloughlin.
The smallest offer at DXB is at Terminal 2, with 195 square metres of shopping space, but this will increase next year as part of major renovation works, he adds.
Liquor, tobacco, perfume, jewellery (gold) and confectionery are an important part of the mix. In fact, the chocolate market is traditionally strong in the Middle East – a popular gift purchase on arrival among locals, who often take packs away in bulk.
Australian residents have also had over two decades to become familiar with duty free on arrival and they make up the majority of the arrivals spend at Sydney Airport, explains David Oldgers, director, Sydney Airport tax and duty free.
“Arrivals shopping makes up for around 20% of sales. It’s certainly an established process and still showing good growth,” enthuses Oldgers.
Its retail operator, The Nuance Group, operates two arrivals stores at the airport’s international piers, and unlike the restrictions in other countries, tobacco and perfume underpins the tax and duty free offer. Passengers can browse and buy just before they reach customs.
Oldgers confirms that today’s savvy airport shoppers are only enticed if there is a true value proposition at the end of their journey. “Arrivals shopping needs to be tax and duty free. Without this underlying premise, it has little value for the customer,” he says.
Generous duty free allowances for liquor in Australia and New Zealand are also a big plus. “This can make the arrivals experience quite compelling,” admits Oldgers.
In Asia, Singapore Changi, which has offered duty free arrivals stores since it opened almost three decades ago, has dedicated liquor stores where passengers can enjoy duty free concessions and Good and Services Tax (GST) relief.
There are also perfumes and cosmetics stores, but no cigarettes or tobacco products due to import restrictions.
The duty free allowance for liquor was changed on April 1 to allow a slight increase in wine and beer allowances for arriving passengers from outside Singapore. “These are traditionally popular products among our arriving customers,” says Changi Airport Group’s director for airside concessions, Ivy Wong.
Positioned at prime locations after the arrivals immigration counters, shopping is designed to be a natural step in the passenger journey en route to the baggage collection areas, explains Wong.
Indeed, creating space for arrivals outlets is one of the challenging aspects for any airport according to Sydney’s Odgers. “Recently some of our stores in Australia have expanded to 1,000sqm, but in general airports are not designed for retail on arrival,” he notes.
It has taken Aldeasa 16 years to take its successful arrivals concept to Malaga, which recently opened its first arrivals store in May inside the new Terminal 3. It is a new concept for Malaga’s large inbound leisure market, and indeed Spain.
The big spend here is gifting, with between 60% and 70% of passengers buying liquors and spirits during trials, says Pedro Castro, Aldeasa’s director for Spanish operations. “Now we are doing tests for other dedicated arrivals shops at other major Spanish airports,” he says.
Aldeasa negotiated with airport operator, Aena, to locate the new arrivals shop airside close to the baggage belt – with a walk through arrivals shop selling a core duty free offer (except tobacco) – to add dwell time to the arrivals experience.
“The walk-through concept is a must on arrival and it’s also about communicating these messages to customers,” says Castro.
Is this the clearest sign yet that arrivals duty free is catching on in Europe? With rising security costs, airports must find new ways to source non-aeronautical revenue, and it appears as if an increasing number are beginning to believe that this can be achieved by encouraging passengers to buy from their home airport.
Earlier this year the Swiss Federal Council approved the introduction of arrivals duty free stores at the country’s airports. A spokesperson for Zürich Airport says: “Passengers have more opportunities to shop on departure, but for reasons of convenience, there might a slight change towards shopping on arrival.”
Elsewhere, new insights into customer needs have also led some airports to introduce a ‘collect on arrival’ service, where typically any product can be purchased in departures and then stored free of charge for their arrival.
According to Sydney Airport, its ‘ready for collection’ service is performing well, alongside its web offer, an extension of this service.
Perhaps of most impact to passengers, the 100ml restriction on liquids and gels restrictions and the low-cost carriers’ increasing limitations on carry-on bags could be the best examples of the merits of arrivals shopping – and a sign of more change to come?
Airport World 2010 - Issue 2