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Summit of the Americas Orlando: “Travel retail is a viable channel, but it’s way below its potential”

March 20, 2018
About the author Christian HolzschuhChristian Holzschuh
Marketing & Communications

The Summit of the Americas Conference, held jointly for the first time by IAADFS and ASUTIL, welcomed duty free and travel retail professionals from the Western Hemisphere and around the globe to Orlando, Florida. According to the conference website, the Western Hemisphere, which encompasses the Americas and the Caribbean, “offers tremendous potential for companies operating in the duty free and travel retail marketplace.”

Total duty free and travel retail sales exceeded ten billion US Dollars in 2016 in the region. As part of the high-powered conference lineup, AOE CEO Kian Gould gave a talk with the thought-provoking title “Travel Retail 2020: Digitally Disrupted or Digitally Evolved?” Three of the industry’s most-influential media, DFNI Online, The Moodie Davitt Report and Frontier Magazine, present a broad overview of his presentation and the discussion of the digital evolution in aviation retail between Gould and Martin Moodie, Founder and Chairman of The Moodie Davitt Report.

According to the live blog of DFNI Online, AOE CEO and founder Kian Gould “questioned whether the current model for engaging consumers is duty-free is still the right model with the technology available. ‘You have all built beautiful stores to encourage impulse spending, but the question is whether this is still the reality of consumer behaviour.’”

DFNI Online highlighted AOE’s work with Frankfurt Airport and London Heathrow as examples of an innovative omnichannel approach to aviation retail.

According to Gould, the new Heathrow Boutique is to go live this week. The plan for the E-Commerce platform is to make most SKUs currently at Heathrow available online by the end of the year.

Kian Gould

Kian Gould

CEO and Founder / AOE
We live in a world where there are more mobile phones than tooth brushes."

The Moodie Davitt Report provides readers with a comprehensive look at conference highlights in its live stream as well as additional coverage. Here’s Martin Moodie’s take on the morning workshop: “This morning's inaugural workshop formula, which I had the honour of moderating, was an excellent addition to the show, according to both IAADFS and ASUTIL. AOE's dynamic Kian Gould was in top form on the omni-channel opportunity and Portland Design's Lewis Allen was, as always, a vibrant and challenging speaker.”

According to Gould, “Airports are an ideal ground for retail, there will always be people at airports but the way selling happens can be strongly augmented and changed over the years. Travel retail is still a viable channel and I don’t see it being destroyed but it’s way below its potential.”

Gould’s proposal, states Moodie: “Let’s grow the pie rather than fight over the shares.” An example of this is, the report asserts, is the double-digit increase in E-Commerce sales at Singapore Airlines – which starkly contrasts a comparable decline in inflight sales.

The Quaternity: A new concept for travel retail

To counter the challenges that the industry is facing, declining per passenger spend, competition by online giants such as Amazon and changing purchasing behavior by passengers – to name the most important –, travel retail needs to find innovative approaches based on digital business models.

During his presentation, Gould highlighted the importance of connecting with passengers before they travel, introducing what he calls “The Quaternity concept for travel retail.” To create the best-possible model for airport retail, all stakeholders – airlines, brands, retailers and airports – need to collaborate. In this way, they can make optimal use of the information they hold about their customers and take into account that more than 70 percent of all duty free purchases are made in advance. The result is a hybrid model of airport retailing, which combines E-Commerce with an Omnichannel approach.

Frontier Magazine also emphasizes the Quaternity approach in its coverage of Gould’s talk. He attributes the radical shift in consumer behavior, where only some 30 percent of all purchases are on impluse, to the accelerating marketing penetration of mobile devices.

According to Gould, one quarter of all retail transactions are mobile, with that figure tripling in China. This indicates a major shift to spending in the digital space. Frontier Magazine states that “Some 70% of the younger generation say that omni-channel shopping is the ideal format and Gould’s company has been instrumental in taking this one step further, extending the trinity concept to a ‘quaternity’ one by involving carriers such as Singapore Airlines for whom it is providing a TR digital platform in conjunction with inflight concessionaire DFASS.“ 

In his presentation, Gould outlines three reasons for the boom in travel retail E-Commerce:

  • Product availability
  • Low cost of returns
  • Low traffic acquisition costs

Gould's conclusion regarding travel retail is an optimistic one, though industry professionals need to make an extra effort to adjust their business models and bring travel retail into the digital age: “Travel retail is still a viable channel and I don’t see it being destroyed but it’s way below its potential.” 

Aviation

How airlines can regain trust, loyalty and revenue by taking control of the digital customer journey.

December’s World Aviation Festival in London was a great opportunity to bring the industry together and, although attendance was inevitably lower than normal, there was a strong conference program that carried a mood of guarded optimism. Best of all, I was delighted to see just how strongly the focus was on real action to drive ancillary revenue and recovery.  Much of 2021 has been spent waiting for a recovery to be established and many airlines have understandably been hesitant (or unable) to commit to new investment or major change in their customer operations. The long hoped-for recovery has been impossible to forecast accurately and many airlines opted to simply ‘hunker down’ and wait until a clearer path can be seen through the storm. That strategy carries deep risks. We now face a new phase of crisis as Omicron sadly develops its global presence but the fact is that the world will continue to turn, people will continue to travel, the crisis will eventually recede, and traffic will return. Airlines need to be preparing right now to create the customer experience that the recovery will demand.  Yes, the picture of how the 2022 travel market will look in recovery is still blurred right now - but the key point is that we do already know exactly what the returning customer looks like and what they want. We have a clear understanding of the experience they want - and we have the digital tools to deliver that experience.