How to adapt to a new generation of travellers
Driven by rapid development in Asia Pacific and the Middle East, global air passenger numbers are forecast to take off in the next 20 years, doubling to 16bn by 2034 and reaching 21bn by 2040. By this stage, China, USA and India will cumulatively make up 40% of global traffic.
Changing passenger demographics do not just show a shift to the east. By 2020, millennials will be the dominant passenger group, making up 22% of the global population, 35% of the workforce, and accounting for 46% of business travel spending.
However, as spend per passenger (SPP) is in decline, it is clear that the industry is not keeping up with their retail expectations.
What do they expect?
High standards of service are becoming the norm and are being set by best-in-class providers across all experiences – regardless of sector. In travel retail, players are increasingly looking to implement e-commerce, with pre-order cut-off points now as short at 6 hours. This still isn't enough to impress customers who are used to Amazon Now's 2-hour delivery, or Toolstation's 10-minute turnaround for click-and-collect orders.
Driven by fluid expectations and changing demographics, new trends have emerged, meaning that conventional retail is undergoing a paradigm shift, supported by digital but empowered by an enhanced service proposition, brand experience and store environment.
We believe that this change can be defined by four key criteria:
As awareness of responsible consumption grows among many passenger segments, evidence of ethical sourcing, production, and day-to-day operations is becoming more important in consumers' choice criteria.
Consumers increasingly value `return on time' – convenience, efficiency and simplicity, often empowered by digital, can create an enhanced purchase journey
Interactive and emotional retail
The store environment is now a provider of social experiences to form relationships between consumers and communities, delivering experiences the online world cannot provide. By fostering an emotional connection to consumers, stores can reinvent themselves as a platform for discovery and emotional engagement.
Retailers do not need to simply embrace trends for trend's sake; rather, they need to excel in three key areas against peers:
Image is all about having a clear vision that drives who the target customers are, what the brand stands for and how it is communicated. A clear vision is key as it shapes the image of the ‘brand’, an ultimately dictates which trends should be set, or followed.
This is followed by product, which is driven by placing the customer at the heart. It is not about the cheapest, fastest or most premium; it’s about having a product proposition that is right for the individual customer.
Finally, access is all about ease of doing business. With millennials, and even more so Gen Z, having bought into digital as one of life’s essentials, making the interaction, or transaction, is easy. This aspect spans both physical and digital retail.
Where are airports at?
Whilst previously having been able to rely on a premium passenger demographic and guaranteed footfall, airports have had to become smarter in order to find new mechanisms to drive spend per passenger and enhance ASQ satisfaction ratings.
Currently, there is little real differentiation between airports. Looking at duty free assortment, almost all airports sell the same categories. And they always have done. Female fragrances and liquor make up the two biggest sellers, and have done for decades.
Airports face difficulties not just with what they sell, but also how it is sold. Shopping at the airport is often the wrong time as passengers might not want to take the product on their trip, they may have bought the product they wanted elsewhere because they didn't know it was available, or they are worried about transfer liquid and gel allowances. There are, of course, attempts to challenge this, from pre-ordering online to ordering for home delivery, but these methods still lag behind global retail standards.
Airports must challenge an outdated business model. The current model doesn't take advantage of airlines, retailers, ground handlers or third party players, as they are often seen as the competition. This does not have the customer at heart, who faces a disconnected journey, which is not something future traveller generations are likely to put up with.
However, there are exciting new collaborations emerging. The ecosystem trials we are seeing, such as those between Budapest Airport, Heinemann Duty Free and Wizz Air, hinge on increasing the customer touchpoints along the consumer journey, and capturing spend outside the physical experience through e-commerce.
If this increased ecosystem interconnectivity can be realised effectively to offer a more holistic proposition, travel retail will be able to deliver the convenience that younger generations demand in their everyday lives, and keep pace with the shifting global retail landscape.
Christina Roseler and Andrew Chandler