The world of airport retail before COVID-19 was booming. Alongside increasing brick and mortar stores, airports have been improving services through personalisation and technology. From Heathrow’s personal shopper service to JFK leveraging Virtual Reality and Augmented Reality to help passengers find the retail shops at the airport, airport hubs were ensuring that passengers make the most of their limited time before and after boarding.
By 2023, duty-free and retail sales are expected to reach about 125.1 billion U.S. dollars. With around 28 percent of the market, the Asia-Pacific region had double-digit growth in 2018 with sales reaching $39 billion.
Is the Asia-Pacific the one to watch?
The increasing number of new air routes and the introduction of LCC carriers are among the main factors promoting the development of the Asia-Pacific duty-free and travel retail market. The rise in the consumption and purchasing power across China and India may have once had a positive impact on the market in this region, now that it’s doubtful yet hopeful.
However, in the region, the growing preference for differentiated and value-added products is boosting the people’s desire to travel, which in turn, is something to note for an expected increase in the demand of the duty-free industry. The adoption of new lifestyles and the introduction of cheap destination travel packages by companies, such as MakeMyTrip, Cleartrip, and GoIbibo, may result in the growth of the global duty-free and travel retail market.
Furthermore, the rapid penetration of social media and digitalization in the economy is expected to create lucrative opportunities for vendors operating in the Asia-Pacific market during this period.
Challenges Ahead for Airports
Despite the boom in airport retail, there are still some challenges to be dealt with. Fast consumer trends change and convert into a fad. Global events, such as the current pandemic, shift and change traveller behaviour.
Before the outbreak, the beauty category was seeing a shift in the hierarchy, particularly within skincare and cosmetics. The new kids on the block have started to eat into an already overcrowded marketplace. The successful launch of Charlotte Tilbury in Travel Retail in 2019 is an excellent example, with many others circling for a late 2020 splash.
The large houses either will make way or buy them. There are also several Asian brands looking to break western dominance, such as Marie Dalgar (Chinese cult beauty brand), Shiro-Shiro (Japanese organic) and Vidivici (South Korean Cosmetics).
The spaces previously reserved for the Top 20 global brands/houses will no longer be a foregone conclusion during the planning and set up of future offers. This shift has already started on the High Streets of many cosmopolitan cities.
Getting value for money via tax-free duty-free shopping has changed too. The Duty-Free price advantage at times less attractive as passengers research, check availability and compare prices online – and then purchase the products at the airport.
Innovation is the Key
Making airports the best shopping destination is what many international airports are doing. Offer the unexpected for impulse buying as well as high-end retail and unique experiences.
Several companies are partnering with duty-free stores to launch their limited or exclusive products. For instance, in February 2018, Lindt launched three new limited-edition chocolates, exclusively for Dufry. The new chocolates were made available at all Dufry stores of major airports in Brazil. In January 2019, the two companies partnered again, to launch Lindt’s limited-edition pistachio flavoured chocolates, made exclusively for Dufry.
By product type, the wines and spirits segment is expected to gain a major share during the forecast period. Gin is booming, we know, and that is not set to finish. But with big-name companies such as Diageo investing in tequila, alongside celebrities such as George Clooney, The Rock, and Nick Jonas, the iconic Mexican spirit is on the cusp of a breakout.
Innovation is the key. 2020 will see the rising importance of data for retail business planning. Using tools to customise airports per passenger profiles, global events, and seasonality.
Data science is further demonstrated through the continued emergence of airport labs. These labs are a concept that straddles all categories, bringing together multiple brands and products that complement each other together in one marketplace, offering quick and easy digital selection, purchasing, online payment, and delivery options. ‘Smart Retailing’ is growing in popularity and a great way of effectively using airports as global shopping windows.
In the face of increased pressure from digital, specialist store staff are becoming the difference-maker in travel retail stores. Just witness the success of Heinemann’s Exquisite store at Amsterdam Schiphol Airport for proof.
People will continue to travel, even after COVID-19, so airports need to continually improve their travel retail offerings as the demands shift and grow.