Build back better

The travel retail industry might be starting to recover, but the issues the industry faced pre-pandemic, remain.

Although travel retail revenues rose year on year pre-pandemic, these increases were unable to keep pace with the rate by which passenger numbers were increasing. Spend per passenger was falling in many markets as a result of increased competition from online players, and a more diverse passenger base.

The forced shutdown has, however, allowed brands and operators to look at new strategies to address the emerging issues from Covid, and also address some of the pre-existing problems as they look to ‘build back better’.

Digitalisation
Whilst the re-opening of stores will result in a fall in online sales, the increased exposure of consumers to online during the pandemic will result in more permanent changes in behaviours. However, the physical store still has a major role to play. Research by ecommerce platform provider AOE and m1nd-set has shown that 79% of purchases involved an online search with webrooming - where consumers research online and compare prices before potentially purchasing instore being more popular than the more familiar and opposite, showrooming.

The research also showed that 53% respondents who purchased duty free made the decision to do so prior to arriving at the airport. Whilst more and more airports have been rolling out digital marketplaces and contactless experiences, airport retail needs to fully embrace the omnichannel experience. We expect the retail and duty free offers to increasingly become integrated with these platforms, engaging with passengers over multiple touchpoints to drive footfall and tailoring the instore design, offer and experience to maximise engagement and encourage spend. 

Diversification
Many airports have relied heavily on the luxury segment to drive retail revenues. This, by definition, is only accessible to a very small proportion of passengers. And so is the reliance on a particularly small segment of the passenger mix within an airport. This works when passenger traffic is stable and predictable, however, with restrictions easing at different times, and future closures a possibility, airports will need to offer a more diverse product mix to appeal to a greater proportion of their passengers.

This is by no means a new phenomenon, with the likes of Next and Zara and most recently John Lewis (which is being replaced by JD Sports at Heathrow T2) having made unsuccessful attempts in the past due to being unable to adjust their business model to the smaller spaces, increased operational complexity, and critically higher costs (both from a staff and rent perspective) that comes with operating in an airport.

As the need to diversify increases, we are likely to see different business models, such as at Lagardere and Lima Airport, where the risk is more equally shared by airport and tenant.

In contrast to duty free and speciality retail, F&B was in the ascendancy pre-Covid, and it is unlikely that this trend will reverse as we start to travel again. Airports will consider utilising space that was  retail as F&B, not only to provide a better mix for the passenger, but also, to create a more integrated space and encouraging passengers to dwell for longer near the retail offer. This was shown at the recent unveiling of Viale di Lusso at Hamad international airport, where a world-first Emporio Armani Caffe and Emporio Armani Ristorante are part of its dining selection, alongside a Starbucks Reserve coffeehouse to compliment the luxury shopping zone.

Flexibility
To be truly effective, both these aspects need to be seamlessly integrated into the physical offer, and the overall environment needs to be relevant and authentic to create an in-person experience.

This is driven by both tenant mix and physical design and integration of the brands. Whilst there needs to be some design guidelines, brands also need to be able to express themselves to create different points of interest, rather than a uniform line where every unit looks the same. Post-Covid design needs to make space as flexible as possible, and product as accessible as it can be.

Ed Newton