I think we are only at the beginning of fundamental changes in travel retail. The market, already bearish in 2015, lost additional momentum in 2016. Margins are also under considerable pressure. Moreover, the statement that duty-free prices are cheaper than elsewhere hasn’t applied for a very long time. And more and more consumers prefer online shopping to the offline variety.
The providers, above all airports, which are important for the overall market, do not want to stand idly by. Though airports, technically speaking, aren’t retailers, they nevertheless structure their leasing models for stores in such a manner as to have a stake in revenue. If sales decline, airports lose as well.
Airport E-Commerce is a complex business, as the various order-, delivery- and – to some degree – returns options must be structured for both on- and offline channels. The learnings gleaned from the multi merchant omnichannel project with the Frankfurt Airport are groundbreaking. The E-Commerce architecture exhibits a complexity that is without parallel. The worldwide interest by airports in our OM³ solution is correspondingly high.
After all, traditional retail is in quite a similar situation. Here too, decreasing revenues and shrinking margins can be found everywhere. Retail needs to move forward.
Here, the players that control the market are mainly brick-and-mortars too – and they are systematically losing market share simply by the fact that revenue streams are flowing more and more toward online offerings. Until now, the logical strategy was to simply establish an own online version of the stationary store – a strategy, however, that hasn’t been followed through with much consistency. We are all familiar with large department store chains; huge stores in the inner cities and an amateurish online shop. Accordingly, most of these endeavors are correspondingly low in revenue.
What astonishes me repeatedly is that conventional retail doesn’t really use its strength – physical presence. For this fact, even if pure-play protagonists naturally fail to recognize it, is also a considerable advantage. An advantage, which in my opinion decision-makers in traditional retail interpret incorrectly. For, instead of thinking in comprehensive customer journeys and thus creating a seamless, greatly improved customer experience, they never tire of touting personal contact, the ambiance, brand worlds, etc. as advantages.
This might have been correct – and important – during the past millennium, in today’s world, however, those players win who can provide the best and most integrated customer experience across all channels. And those players win who make things for their customers as simple as possible. It is here that airports in cooperation with their duty free vendors are currently performing pioneering work.
So, instead of merely developing a separate E-Commerce branch the order of the day is to integrate online commerce into the existing, stationary business.
I’m constantly amazed how bogged down the idea of the E-Commerce business model has become. It really is quite simple though: All you have to do is examine all of the processes and evaluate how you can redesign them with the help of new technology to reach the goal faster, at lower costs and – most importantly – in a way that is easier for the customer.
Of course, this is easier said than done. Retailers have many monolithic systems and, quite often, organizational structures that rarely make this endeavor any easier. But is there a future-oriented alternative? I don’t think so, at least no alternative that does not result in long-term significant losses.
Now the situation with the classic shopping malls is quite similar to the one airports are facing. For the most part, shopping malls also close rental contracts that are revenue-based. Mall operators are well-positioned to enable their tenants entry into true multichannel E-Commerce. They can simply copy the model from the airports. And learn at the same time.
Aviation & Travel
One of the biggest emerging trends I have seen in the airline sector over the last couple of years is the concept of passenger self-serve onboard or order to seat. Despite the almost constant discussion at every industry event, the funny thing is, this isn’t really new at all – almost 10 years ago, a former CEO of an onboard retail technology provider proclaimed: “Over time the duty free model will shift to 100% passenger self-service transactions. One of the biggest reasons being the fact that the trolley only comes down the aisle once a journey, for half an hour – in essence the duty free store is only open for half an hour. If I can make transactions myself, through self-service technology, the store is open for the entire flight.” And yet, a decade later, this isn’t even close to the reality on-board most aircraft. During the pandemic, with the need for social distancing, coupled with a desire for innovation, self-service again bubbled to the fore – it gained a new level of relevance. With passengers across all demographics accustomed to ordering everything from groceries to new cars via their phones, digital transactions onboard an aircraft look to be a natural extension of what has become an everyday digital experience. The aviation sector is obsessed (but occasionally intimidated) by digital answers, and there is much that can already be done. Making a digital store available for browsing and even purchasing is achievable, both on IFE and passengers own devices. The process raises a number of operational implications, such as how crew learn of and deliver orders, how payments are handled (particularly if there is no air-to-ground connection) and how this sits alongside the existing cabin service. All of these issues require significant thought and, in some cases investment; and there lies the heart of the problem.
WIESBADEN, GERMANY, 19 JANUARY 2023 - Omnevo opens 2023 on a high with the announcement of two new airline projects following the launch of digital platforms with Fly Arna, Armenia’s national airline, and Fly Jinnah, a low-cost domestic carrier connecting main cities across Pakistan.
Aviation & Travel
In his two previous blogs in this three-part series looking at digital revenue adoption by airports, Daniel firstly outlined the compelling commercial rationale of ‘Why?’ airports should develop a digital revenue platform. He then explained the ‘How?’ - detailing the phased program in the creation of a digital revenue platform. Now he explains ‘Who?’ – highlighting the key roles required across the joint airport-Omnevo team to make the project a success.