The young ones
With the continued rise in low-cost carriers (LCCs) and growing market share of Ryanair, easyJet, Southwest Airlines and other LCCs, industry experts are predicting a long-term increasing trend towards less affluent and younger passenger profiles.
Corporations are also reducing business travel and making the most of virtual meetings. By 2025, Millennials and Gen Zs, will make up more than 50% of all passengers, whilst the share of business travel, long-haul groups, and Chinese passengers (historically the consumers of luxury goods sold at airports) will decline.
So, what does this mean for airports?
Understanding the passenger profile is essential in achieving a successful commercial strategy and an appealing and relevant retail mix at the airport. Traditionally, there are four key passenger groups all with different purchasing behaviours. It is important to understand what this means for airport retail and evolving consumer trends.
Baby Boomers
Most Baby Boomers, typically born between 1946-1964, don’t find shopping relaxing, and either don’t enjoy browsing for new products or don’t need to search for deals given their high level of disposable income. They browse online but prefer making a purchase in-store.
Gen Xs
Born between 1965-1980, Gen Xs tends to shop more conservatively and are more sceptical of marketing than the other groups. They thoroughly research before purchasing and are receptive to personalised emails. Both in-store and online shopping are popular with this generation.
Millennials / Gen Ys
Millennials, born between 1981-1997, are constantly online, even while shopping in-store, and seek a seamless, omnichannel experience. They see shopping as a social event but value consumer reviews above those of people they know.
Gen Zs
Gen Zs are the youngest consumer group, born between 1998-2010, and use the web and social media to get inspired and research products, but still enjoy the social aspect of shopping at a physical location. Technology drives their purchasing habits, and they look for store experiences that recognise that.
Millennials and Gen Zs are showing an increasing appetite for travel retail and are driving change in the market, demanding a new type of shopping experience. An increasing desire for digital experiences, driven by the changing demographics of the younger, modern flyer, signals a structural shift in how passengers engage with travel retail. According to m1nd-set, the number of Millennials purchasing in duty free shops increased from 15% to 22%, between the period before Covid and the period after. Gen Z shoppers also doubled from 4% in 2017-2020 to 8% in 2021-22. To remain relevant, retailers need to embrace digitisation to entice travel shoppers through modern, convenient shopping experiences.
Bain forecast total airport retail sales directly influenced by online sites to increase by 30%, up from low single digits today which means airports need to cater to younger, digital savvy consumers and develop their digital and omnichannel strategies. Travel retail demand patterns will vary by airport type, passenger mix, and geography but the broad trend towards omnichannel retailing is already being witnessed throughout airports globally.
Retailers and F&B operators are reacting to changing consumer trends by making significant changes to their proposition and embrace digital retailing. REEF have launched the first ever virtual food hall at Raleigh-Durham International Airport, a ghost (or dark) kitchen in Terminal 2. The kitchen allows passengers to order from nine different restaurants and pay through the app or directly at the getREEF kiosks. Orders are then picked up in the lockers near the order kiosks.
Several top travel retailers and digital leaders have also teamed up to elevate and evolve the commercial airport landscape. Alibaba, a Chinese e-commerce group, have partnered with the Swiss duty-free retailer, Dufry, to drive their omnichannel platform and further integrate their online and offline shopping experiences. Similarly, JD.com have formed a joint venture with Lagardére Travel Retail to evolve their omnichannel business model and gain expertise in smart supply chain, logistics, analytics, and consumer insight.
Heathrow Airport partnered with Chanel to launch and immersive experiential retail activation. A Nº5 Spaceship was placed in the departure lounge at Terminal 5 and included a "Find Nº5" game for consumers. An augmented reality digital screen also allowed shoppers to virtually try on products, with the pop-up being the only travel retail location to sell Chanel's advent calendar.
As passenger numbers begin to approach – and exceed – pre-Covid levels, airports must re-evaluate their passenger base, building an understanding of consumer groups (and their associated demographics and travel behaviours) and adapt their retail offer accordingly.
Jemima Scott