Airport retail: rise and rise of the shopping centre, with an airport attached
A huge, and growing, proportion of the money made by airports is from retail. It seems that the industry expects significant increases in this spending over the coming years, and airports do all they can to get passengers to spend as much time as possible in retail, put retail outlets in arrivals, etc etc and devise means for them to buy goods for collection on their return, to avoid baggage problems. The industry expects most growth in the Far East, where women tend to spend a lot of designer brands. The airport retail industry finds passengers buy less when they are stressed by airport security waits and queues, and they buy more when calm and happy. Airports need a ticket as proof of identity, so they can monitor the types of travellers, and the routes, which generate the most cash. Seems the Chinese, the Russians and the Nigerians tend to spend the most. At Heathrow, the average passenger spends £4.35. But for fashion, the average BRIC passenger spends £45.50. No wonder BAA wants more.
Heathrow voted top of the shops
Heathrow has been crowned the world’s best airport for shopping for the second year in a row. The accolade was awarded to Heathrow in the Skytrax World Airport Awards, one of the aviation industry’s most prestigious awards.
BRIC nations lead retail boom at London Heathrow in 2011
Source: ©The Moodie Report
By Matt Willey
Retailers at London Heathrow Airport recorded a strong +8.8% rise in gross turnover in 2011, led by a boom in luxury spending from passengers using the UK hub to connect from emerging markets.
Gross retail sales at Heathrow increased in 2011 to £1.7 billion (2010: £1.5 billion), while Net Retail Income per passenger increased by +5.3% to £4.35 (2010: £4.13)*.
Total fashion & accessories sales across the airport posted +17.7% growth. The airport attributed this to its exposure to passengers from the BRIC nations – the rapidly expanding economies of Brazil, Russia, India and China – who spent an average of £45.50 in 2011, compared to £37.22 in 2010, as well as a strong portfolio of international luxury brands.
Airport research and passenger feedback has led Heathrow to continue to strengthen its strong portfolio of premium brands – which already includes Chanel, Hermès and Prada – with the opening of Miu Miu in Terminal 3 last autumn.
Pop-up stores have also contributed to the growth in sales of luxury goods. The Heathrow retail team said it had collaborated with brands including Jack Wills, Ray-Ban, Chanel Watches and Laduree. Heathrow was crowned the best airport for shopping for a second year running at the 2011 Skytrax World Airport Awards.
Heathrow Retail Concessions Director Muriel Zingraff-Shariff said: “Shopping for luxury retail goods in the UK is an attractive proposition for foreign visitors – and Heathrow’s price proposition makes it even more so. We now have passengers who are choosing to fly through Heathrow specifically to pick up items sold here and we have continued to witness a significant increase in demand for luxury goods from Chinese passengers as well as the Middle East with British brands such as Mulberry, Burberry and Smythson proving particularly popular.”
“As part of the modernisation and improvement of Heathrow we are continually seeking out new brands and retailers as well as developing new concept stores that we know will resonate with our target market.”
World Duty Free also performed strongly, posting growth of +12.7%. Heathrow’s retail performance is bucking the trend of UK high street sales where the most recent figures show a growth of just +1.3% according to the Office of National Statistics, and a -0.9% decline in footfall according to the British Retail Consortium.
The airport’s positive year in 2011 was capped by an encouraging report in ACI’s Airport Service Quality (ASQ) survey, which revealed that passengers say their overall customer experience at the airport continues to improve. 70% of passengers rated their experience at Heathrow as either ‘very good’ or ‘excellent’, which had risen from 68% in the same period in 2010 and 57% in 2008.
Heathrow Commercial Director John Holland-Kaye said: “These latest retail results are very encouraging and we are delighted that our retail partners and our airport team have worked so well together to deliver such an amazing performance in a time of economic slowdown. The strength of Heathrow’s retail offer is the range and value available – from everyday items like books and toiletries to luxury goods, our customers are spoilt for choice.
“The strength of this performance can also be attributed to Heathrow’s ability to connect with passengers from emerging markets in particular. It’s vitally important that Heathrow continues to be supported as it plays a significant role in bringing sustained growth to the UK.”
*Note: These figures are a subset of total commercial numbers and include all in-terminal shops, but exclude media, telecoms, car rental and car parking. This, said BAA, explains the slight difference from the Net Retail Income per passenger figures released earlier this month.]
Retail revenue reaches $1 billion at India’s airports
30 January 2012
Retail revenue at India’s airports reached US$1 billion in 2011, a study carried out by retail consultancy firm Asipac Projects has revealed.
According to The Times of India, the study showed airport retail business grew by 17-18% last year following an increase in passenger traffic and more people shopping while they travel.
Beauty, personal care and alcohol & tobacco were the top three purchases in the duty-free category while food & beverage, books, periodicals and stationary were the most popular choices in the duty-paid section.
Globally, airport retail revenue reached US$43 million with airports such as London Heathrow and Incheon Airport being the most lucrative, The Times of India reported.
“Airport stores are twice as productive for us compared to stores outside, in terms of sales per sq ft, though operational costs go up substantially at airports . Internationally, sales per sq ft are four to five times more compared to street stores at some of the busiest airports. We have a long way to go to reach those numbers,” Dipak Agarwal, chief executive (operations and strategy), DLF Retail, which runs retail stores like Mango and Boggi Milano at Delhi’s IGI Airport, told The Times of India.
Read the story here: The Times of India
Below are a few extracts from a report called
Global Airport Retailing: Market Size, Retailer Strategies and Competitor Performance
Following a drop in sales in 2009 the global airport retailing market has bounced back. However, growth is being driven predominantly by passenger volumes, which are increasingly rapidly in emerging markets, rather than an increase in spend per passenger.
In 2011, Europe was the largest airport retailing market, however Verdict forecasts that it will be overtaken in size in 2012 by Asia Pacific.
The global airport retailing market is forecast to expand by 44.5% from 2010 to 2015 with most of this growth coming from emerging economies especially in Asia Pacific, which is forecast to grow by 76.2%, and the Middle East and Africa which is forecast to grow by 40.0%.
Fashion and accessories is the largest product category accounting for 25% of global airport sales in 2010. Sales of fashion and accessories have increased rapidly in recent years driven by the strong appetite for luxury brands in Asia Pacific.
In 2010 this region was responsible for 45.6% of fashion and beauty sales at airports.Walk through stores in airport terminals are growing in popularity. The format enables retailers to create an environment through which all consumers must pass to reach their departure gate. The shops, which tend to include flight information screens, are effective at targeting time scarce consumers.
Global airport retailing outlook, 2011–15- Global airport retail sales to reach $39.1bn by 2015.
Passenger numbers will increase globally by 2015. Spend per passenger will increase globally by 2015.
Airport retailing sales by category – Fashion and accessories is the largest product category in global airport retailing- Fashion and accessories is the dominant product category in Asia Pacific and the Middle East. Fashion and accessories will remain the largest retail category up until 2015.
The cost of travel determines passengers’ ability to fly and is linked closely with consumer disposable incomes. Flight routes determine passenger volumes at each airport-
Barriers to passenger spending – Worries over baggage allowance dampen passenger expenditure. Shortened shopping times decrease the time available for consumers to make purchases. Low disposable incomes reduce customers’ ability to shop. Security processes aggrieve consumers, putting them in a bad mood. Competition from alternative retail destinations can deter passengers from making purchases.
Strategies to drive passenger spending – Arrivals stores offer a new growth opportunity for retailers. Offering a home delivery service can combat luggage restrictions. Online duty free sites can drive sales from time-scarce consumers. Collect on arrival assists passengers affected by baggage restrictions to shop with confidence. Enforced footfall of walk-through stores creates major opportunity.
Increasing Non-Aviation Revenue Whitepaper
It is widely acknowledged that an increased airside dwell time will lead to increased retail spend. Similarly, a passenger that passes through security and remains relaxed will also be more inclined to make purchases in airside retail outlets.
The lack of intelligence on dwell time and increased demand on airport processes makes it challenging to create an environment conducive to passenger expenditure.
In an ideal situation, passenger processing and progression through security should continue to run efficiently and effectively regardless of peak demand, delivering passengers airside who remain relaxed, and thus more inclined to spend, with additional time in retail concessions.
This ideal can only be achieved if an airport has an accurate measurement of passenger movements and dwell times at all stages of their journey. Key pinch points at security can only be eliminated as a result of proper planning and effective operation, particularly at peak times. Communication of wait times to passengers is often neglected, a simple process that will ensure they are well informed and remain relaxed.
The Increasing Non-Aviation Revenue (INAR) survey examined the current impetus for airports on increasing spend airside, rationalising the link between improved PAX measurement and processing and stronger retail performance.
Retail choices: Shopping at the airport takes off
By Claer Barrett
Doing your shopping at the airport is one of the hottest UK retail trends, as travellers get wise to the money-saving benefits and increasing range of shops on offer. This year, UK airports have reported steep rises in shopper spend, and are developing increasingly sophisticated strategies to entice passengers to spend even more money.
With extensions and refurbishments in full swing, the two key trends are attracting new retailers – particularly luxury and fashion brands – and using the internet to ease and extend the retail experience.
As passengers are anxious to get through security early, airport retailers on the “airside” are best placed to exploit the captive audience.
“Effectively, it’s a retail lock in,” argues Fiona Hamilton, retail director of Jones Lang LaSalle, the property consultancy, which is advising several retailers on their expansion strategies. “Over 35m passengers pass through Gatwick a year, which is the same footfall as a very large shopping centre. The set-up costs for retailers might be slightly higher, but once you’re in, the sales densities are much greater.”
At Gatwick, passengers spend an average of 70 minutes milling around shops in the passenger lounge before proceeding to the departure gates.
“Airports offer a greater degree of resilience in a tough market than high streets,” says Vicky Wyatt, business development manager for retail at Gatwick Airport, which is about to unveil refurbishment plans for its South Terminal to retailers at Mapic, the retail property exhibition in Cannes. “Every day is Saturday. For most retailers, their airport business outperforms their high street stores. When they’re in the holiday frame of mind, passengers are more likely to spend on discretionary items in here than on the high street.”
Convenience is a powerful factor, but what about the prices? “There is a perception that you can only access the best prices if you fly outside of the EU but, with the exceptions of cigarettes and alcohol, the price advantages are the same – you won’t have to pay 20 per cent VAT, so goods are significantly cheaper than the high street,” she says.
However, not all shops are 20 per cent cheaper. Electrical goods, a low margin category, tend to benchmark prices offered on the high street and via internet sites such as Amazon. However, Ms Wyatt says that fashion is now the “key area” for retail expansion.
The first phase of the South Terminal’s redevelopment will complete in time for next summer’s passenger peak. “We’re keen to bring in brands that currently aren’t in the airport arena,” says Ms Wyatt, who hopes that direct routes to Vietnam, Nigeria and Malaysia will raise the ratio of wealthy international travellers who pass through Gatwick. Currently, 83% of passengers are British holiday makers.
The analytics of airport retail, where passengers must present a boarding card before purchasing, gives retailers much greater insight into who is buying what. “Retailers can easily monitor sales by airline, destination or nationality,” says Ms Wyatt. “They can quickly understand what passengers are looking for, and marry that information against the flight schedules, ensure they have appropriate language speakers on the staff, and even arrange their merchandise at certain times of day to target particular customer groups.”
For example, Nigerian women are very fond of buying shoes at the airport, but tend to have larger feet, so retailers can make sure they have good numbers of larger sizes in stock.
Getting passengers to buy before they leave home is another way of targeting cash-rich, time-poor customers. Heathrow has a very advanced web ordering service which can be used between one month and 48 hours before flying, which clearly shows the 20 per cent discounts on offer when measured against high street prices.
Passengers can browse goods and enter their flight details to reserve items, including many from designer retailers, at “airport prices”. Pre-ordering clothes and shoes is a little clunky – there is not yet a built in option to specify what size you need, for example – but if you try on reserved goods and are unhappy, there’s no obligation to buy. However, shoppers can only use the reserve and collect service for shops inside the specific terminal they are flying from, and may be asked to pay a deposit on higher value items.
Gatwick opened its e-shop this summer, and retailers including World Duty Free, Dixons and Boots have signed up to the service, which requires online shoppers to enter full flight details. It also has a “shop and drop” service, where duty free goods can be left at the airport, and picked up upon the return flight.
“The biggest seller so far is baby milk,” reports Ms Wyatt. “Families want to take the brand their child is used to, but don’t want to pack it inside suitcases, and can’t take it through security in hand baggage,” she adds.
At Heathrow, overall passenger spend was up 16.4% year-on-year to £208m ($333m) at the end of June.
“Passengers often chose to spend more money when they are flying and have been doing so for the last two years, which bucks the trend on the UK high streets,” says John Holland-Kaye, commercial director of BAA. “It is partly down to large numbers of international travellers, where we’re seeing a rise in visitors from emerging economies, especially Chinese passengers. They are quite discerning, and want to purchase luxury brands.” He says the Chinese spend the most, followed by the Russians and then Nigerians.
Multi-lingual Heathrow customer services staff, dressed in distinctive purple uniforms, stand below the departure boards. “They are they to provide general customer services, but their job has expanded,” says Mr Halland-Kaye. “A lot of passengers ask: ‘Where can I buy a watch?’ ”
Heathrow has recently installed China Union Pay terminals into the World Duty Free store in Terminal 3 to makes it easier for Chinese passengers to spend large sums.
“The more we make out of retail, the less we need to charge for people using the airport, which is important for keeping Heathrow competitive as a retail hub,” Mr Holland-Kaye adds.
Targeting passengers as they leave the airport is another potential growth area. At Dublin Airport, a Duty Free shop has been installed outside the “airside” zone where departing passengers get a last chance to buy tax free goods on production of a valid ticket.
With the competition for passengers’ spending money intensifying, it stands to reason that not all of these airport retail initiatives will have wings.
Retailers taking off at the airport
Despite the turbulence on the UK high street, retailers are launching plans to expand by taking stores at airports, both in the UK and internationally.
Some of the most high profile store openings this year have been from designer brands, tempted by the high-spending international traveller demographic. Miu Miu opened its first UK airport store at Heathrow this autumn, following hot on the heels of Harrods, which launched a “walk through” designer store in Terminal 3 with concessions from luxury brands including Cartier and Etro.
From the fashionable to the functional, WH Smith, the high street stationer, newsagent and bookseller, announced plans to treble numbers of airport stores at its full year results in October.
It currently trades from 32 airport stores in locations as diverse as India, Scandinavia and Australia and has signed up to take 28 more. Kate Swann, chief executive, expects the total airport store count to get “well into the hundreds” anticipating the airport portfolio to treble in size “in five to ten years”.
“It’s going to be a lumpy expansion,” she says. “You never see any vacant shop units in an airport. We can only expand where new space is being built, or if landlords retender space. Some years we will open 15 stores, some years it might be three times that number.”Airports in both the developed world, and developing countries, will both be using a franchise model.
In the UK, WH Smith is expanding its range of British souvenirs, with over 16 metres of shelf space devoted to Union Jack-adorned memorabilia in its largest airport stores. “It is to coincide with the Olympics next year,” says Ms Swann. “There will be more passengers coming into the UK, rather than UK customers departing. At our UK airport stores, we receive five times the spend from UK departing passengers than international passengers flying in. They’re less likely to buy English language newspapers, magazines and books.”
Mainstream fashion retailers are also gearing up to target the tourist trade, with Zara about to open a large store in Heathrow’s Terminal Five.
“It won’t be long before we see the likes of Apple, Hollister and Jack Wills taking space in airports,” argues Fiona Hamilton, retail director of Jones Lang LaSalle, a property consultancy which is currently advising on several airport retail-related transactions. “Retailers who previously would not have considered taking space inside an airport now realise there’s such a lot to go for.”
There is a report by Marketing Week on airport consumer spending (May 2011) at
One of its many findings is that 32% of those passing through airports do not buy anything, and Marketing Week is keen to “move them further up the purchasing ladder”. They also grieve over the fact that business travellers, who should have more to spend, go straight to the lounge, avoiding retail opportunities.