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Travel Retailers: Groundbreakers for traditional Retail?

January 30, 2017
About the author Alain VeuveAlain Veuve
Managing Director, AOE Switzerland

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.

Don’t stand idly by

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.

A Retail 2.0 Pioneer

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.

Integrate Online Commerce into the existing Business

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.

Shopping Centers

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.



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.