The global retail industry has undergone significant changes in the past decade, in large part driven by the rise of online shopping and digital media in the United States. International e-commerce growth numbers are encouraging as well. Unfortunately, while consumers’ habits have changed, many airports and airport shops have failed to adapt their retail offerings accordingly. Airport products, layouts, and sales channels remain largely unchanged since the early 2000s, preventing them from capitalizing on the smart device-driven digital influence in retail.
Change can be difficult, but necessary for airports
Some airports and airport retailers have been slow to respond to changing consumer demand for web-connected and digital retail experiences anywhere they go. Some have embraced the new reality brought on by disruptors like Amazon, but are still working on developing a modernized retail strategy and setting aside funds to respond. A few of the top challenges for airports and airport retailers exploring modernization:
- Lack of Profit Motive. The profit motive, which drives commercial innovation and success elsewhere, is often absent at North American airports. Few, if any, U.S. airport commercial staff goals are aligned or measured with achieving sales or revenue goals. Further, commercial teams at airports may not have significant traditional or digital retail experience, limiting their knowledge of industry trends and best practices.
- Length of Existing Contracts. Airport retail contracts often have fairly long terms, limiting an airport’s flexibility to implement changes and proactively respond to changes in the industry. These contracts often do not incentify operators to innovate, offering no rewards for the exploration and implementation of additional sales channels.
- Getting to Know Passengers. It is well established that different passenger segments behave in different ways, making it hard to cater to all audiences throughout an airport. No single change will address this. It is impossible to address the different types of passengers until the airport and its retailers know who is actually passing through. Understanding these customer segments or personas is a key first step to a focused strategy. Developing these personas goes beyond just analyzing survey data, and requires insights into anthropology and psychology, as well.
- Information Sharing Complications. Not all airports share data with their retailers, and most retailers do not share detailed information with airport operators. In order to develop strategies to impact the entire airport, combining voluntary passenger satisfaction surveys with hard sales data that includes outbound flight destination, when available, will offer a bonanza of data to help improve and target aspects of the retail program and overall customer experience.
Airports need to take a measured response to changing retail trends
Adding technology, by itself, to the airport retail mix will not rapidly address the evolving expectations of all travelers. There is no one-size-fits-all solution. However, we believe that a combination of consumer-oriented strategies will result in the biggest impact for passengers becoming accustomed to digitally-driven experiences in all aspects of their lives. Here are key steps airports should take to advance their unique retail modernization efforts:
- Understanding Customer Personas. Passenger behavior is complex and guided by aspects of travel, personality, motivations, jobs, family status and time until their next flight. Getting to these personas goes far beyond just simple survey analysis. Fully understanding the makeup of airport retailer customers requires deep insights into human behavior. Simply crunching survey data is no longer enough.
- Embracing Customer-Focused Outlet Designs. Consumers increasingly expect a personalized and unique shopping experience. That’s why the design of in-terminal retail outlets need to reflect tailored experiences found in e-commerce and traditional retail environments. Mass merchandising techniques – pile it high and sell it cheap, for example – will only go so far. If an airport or retailer is seeking to target the more sophisticated traveler, their decor must reflect this new reality.
- Developing Airport Branded Mobile Device Apps. Putting the power of technology into the hands of customers offers one way to entice purchasing behavior. After all, most passengers carry at least a single device with them when they travel. Developing and deploying an app that is useful in multiple airports, and which provides convenience, knowledge of what is available, and, potentially, discounts, can be one way to take advantage of this. It is key, however, that the app works in multiple airports because it is unlikely that a traveler will download and use apps for every airport that they visit.
- Sending Targeted Offers Through Digital Platforms. Airports can use apps and loyalty programs to target price-sensitive customers and encourage impulse purchases. They should look for opportunities to send targeted promotions to customers, both prior to and during their journey through the airport. Only a few airports, notably Copenhagen, have taken advantage of this opportunity despite beacon and Bluetooth technology offer significant possibilities.
- Creating An In-Airport Experience That Delights. Presenting a retail environment that leaves people with a lasting positive impression helps relax travelers, making them more likely to shop. Few airports rival the way Singapore’s Changi makes a strong impact on travelers. The airport’s $1.7 billion Jewel development, for instance, will offer more than 300 retail outlets and a 130-foot waterfall. Changi also hosts the Hello Kitty Orchid Café, the winner of the 2017 Moodie/Davitt Food and Beverage (FAB) Award for New Food and Beverage Concept of the Year. Changi is unique to the extent that they offer such innovations, but the concept is available, and possible, even on a smaller scale, for all airports that want to create a lasting impression.
The airport retail bottom line
The expectations of the modern traveler have changed and increased rapidly in recent years. Despite a potentially overwhelming and noisy commercial environment delivered by the near omnipresence of digital technology, it is possible for airports to deliver a satisfying and engaging customer experience. Airports should look for opportunities to partner with both airlines and retailers to make it happen. By taking the time to truly understand their travelers, airports across the globe can build a successful retail strategy that significantly increases their commercial revenues – and creates memorable passenger experiences.
Natasha Page is a Senior Manager with ICF’s London aviation team, with a focus on helping airports maximize profitability through optimizing both commercial revenues and operating costs.
Alan Gluck is a Senior Manager with ICF’s U.S. aviation team, with focus on the development of commercial revenues and improving the customer experience through better, more targeted concession programs.
