August 7, 2019 / Director's View

Travel Retail

haiqal osman

In recent years we have seen travel explode. The tourism industry is the fastest growing industry in the world, with international travellers’ spending increasing 28.8% from 2017-2018.

It is no surprise to us that certain retailers are likely to perform better in terms of sales at travel terminals and we’ve been tracking four types of purchases made.

  • The first are last-minute purchases, driven by the fear of travellers not having what they need when they arrive at their destination. As much as this sort of purchase sounds to be negative and rushed, retailers are providing a solution to a traveller’s problem and are positively impacting the overall airport experience.
  • The second type of purchase stems from the convenience of being able to shop in an airport. This is driven by consumers that have time to kill in an airport and would rather spend time gathering the essentials needed for their trip, rather than waste their precious holiday time shopping.
  • The third type of purchase is luxury items, with shoppers taking full advantage of the removed duty on luxury brands and products.
  • The final type lies in the Food & Beverage sector; these purchases thrive in airports due to the strict airport liquid regulations as well as the limited food selection when on a flight which drives sales in high margin products like coffee, tea, and water.

The Luxury Goods Pull

When retailing in an airport, brands need to take into consideration whether their offerings genuinely cater to one or more of the four above needs.

To do this, brands can also work with data that airports provide in an effort to be conscious of shaping their offering around, for example, popular locations and the climate of different seasons.

Luxury products are largely impactful due to duty-free as shoppers are more likely to make a large purchase if they know it is at a discount. Many customers will enter with a general need in their spending and in this instance, it is important for brands to recognise that travel retail environments are becoming more competitive.

When Sheridan&Co works with brands in travel retail, we think hard about how to leverage every inch of the space. Each brand should consider how to: entice customers in, educate them about what makes that brand special and worthy of their money, use the physical space to help them to select products that are genuinely right for them and provide the best possible platform for their staff to work from.

Engagement Is Key

In Travel Retail, with customers on a specific time deadline, the challenge is invariably, ‘How do you do this in less space and less time than many other retail environments?’

Engaging consumers and stopping customers from just going straight to the lounge in an airport is important for driving sales. Interacting with consumers prior to the airport can help, with some brands now offering a click and collect at airport options, both before getting there as well as on return.

Additionally, seeing the airport as part of the entire holiday experience adds an element of freedom and spontaneous spending to consumers’ purchases; they will have a looser, less budget-focussed view, buying last-minute items and treats, which increases spending.

Location, Location, Location!

Being in a convenient location for a brand’s target customers should always be a top priority for each brand. If a customer needs a certain brand directly before they embark on a flight to a different country, the brand should be at the airport ready to serve them.

By ensuring the location is always carefully considered (and indeed tested where possible) the right brands can flourish in travel destinations, be that an airport, high street or department stores. Our Strategy process at Sheridan&Co helps us to recommend and prioritise locations as well as tailoring the offering to suit those specific places.

WHSmiths’ offerings work well, as they cover convenient, last-minute purchases, and a selection of food and beverages. However, they pay no duty on their products but do not pass any savings onto the customer. Customers probably feel like they are getting a good deal because of their location in an airport where other retailers are removing the duty, however, in reality, they are paying high street prices for their airport items. This move from WHSmiths makes for a more profitable business model for their company and others like them.

With international travel expected to quadruple between 2020 and 2050, airports are a great investment for all retailers. Not only will a brand be seen by more customers than ever before within an airport, but they will also be associated with the feeling of adventure and opportunity which international travel offers.

No matter the stage your business is in, we would love to talk about how we can support during the current and future stages of growth. Please contact team@sheridanandco.com to continue the conversation.

 

All the best,

 

Freddie.