With the holiday season approaching, consumer spending at the UK’s major airports is likely to rise sharply as shoppers seek last-minute bargains before jetting off to exotic destinations.
A recent survey of 1,000 people by BDRC Continental seen exclusively by Marketing Week forecasts not only a significant growth in airport shopper spending but also a shift in shopping habits. To stay ahead of the game, airports are looking at shopper psychology to offer a retail mix that complements changing consumer tastes and demographics.
Airport retail sales will increase by an average of six percentage points a year between 2008 and 2012, according to the report, and the UK has among the best shopping facilities in the world, with London Heathrow scooping the Best Airport Shopping award for the second year running at the Skytrax awards earlier this year.
But the statistics also reveal that a third of people want to avoid lingering in shops and actively try to reduce the amount of time they spend at the airport. Retail marketers are working to change the underexploited opportunity represented in this statistic. Examples include layout strategies such as walk-through shops as soon as passengers land that encourage an uplift in duty free sales.
Nick Adderley, marketing and insight director at Heathrow, points out that the most effective airport retail offerings have to be “on the way” of the passenger journey rather than “in the way”. In addition to this maximum exposure, duty free options are available to people arriving at airports. More aggressively promoted now are the options to buy items on the flight out and collect on return to the airport at a later date.
Currently, 32% of passengers are not buying anything at the airport, and the research points out that it would be prudent to gain greater insight into this group in order to move them further up the purchasing ladder. Interestingly, business travellers who should have money to spend go straight to the lounge, avoiding the retail opportunities.
Browse and buy
Among those who do use shopping facilities at airports, 39% of UK adults like to browse around shops and sometimes buy things, and a further 26% like to browse but rarely buy.
Converting shoppers who like to browse into buyers is now a strategy being aggressively pursued. Steven Sturgeon, of alcohol producer CL World Brands, says brands should explore the idea of retail partnerships within the untapped business lounge environment. “The challenge is that you go to the lounge because you want to get away from it all,” he says. “You will need to balance that tension of business travellers wanting peace and quiet and creating the opportunity to weave in purchase as part of an experience.”
The fastest growing revenue opportunities in the future are perfumes and cosmetics, which currently amount to a fifth of retail sales at airports. “If you go to airports now you will see much greater prominence of these items,” says Colin Shaddick, director of BDRC Continental and author of the report. “The amount of retail space given over to beauty products, especially those with a health and youth proposition, will grow.”
Drinks and snacks are what most people buy at the moment, followed by books and magazines, fragrance and cosmetics and then alcohol and tobacco.
Shaddick acknowledges that the rise of health and beauty products might have an adverse effect on duty free alcohol and tobacco sales. “You tend to associate airport retail with alcohol, cigarettes and perfume but the indications are that those items are going to be overtaken by confectionery, cosmetics, specialist food items and luxury goods,” he says.
This trend is closely linked to the increasing importance of emerging economies, particularly Asia, where there is a heightened predisposition to spend on luxury goods. The proliferation of luxury brands at Heathrow Terminal 5, including Tiffany, Bulgari, Cartier and Chanel, is just one example of the effect of changing passenger profiles.
Indeed, Heathrow itself differs in its offering to airports better known for leisure travel such as Luton. The UK’s biggest airport has a diverse offering to cater for a broad audience, which is rooted in the economics of a healthy passenger spend at the destination. Net retail income per passenger at Heathrow rose by 11.3% to £5.51 for the first quarter of 2010, up from £4.95 the previous year.
Using the strapline “Heathrow shopping. The West End for less”, airport owner BAA ran its first retail advertising campaign last year pushing the message that it offers all the benefits of London’s best shopping destinations at a discount.
Recognising consumer trends and changing passenger purchasing patterns, this is the time for the UK’s diverse airports to capitalise on their own unique identities and deliver the rich retail mix available to a retail savvy audience of sophisticated shoppers.
“Retailers need to demonstrate local knowledge for not only existing customers but the future demands of passengers,” says Shaddick. “Airport owners are also zealous about delivering the right experience to the customer so a retailer’s offering needs to fit with both the airport personality and enhance the passenger experience.”
The frontline: we ask marketers on the frontline whether our ’trends’ research matches their experience on the ground
The changing passenger mindset and the different passenger profiles cited in the research are very applicable to where Giraffe is at. I agree that business class passengers bypass the retail offerings at airports. The people who dwell there are ones who are more excited by travelling, who go on one or two holidays a year and arrive early to get the whole airport experience.
The way forward for airport retail is going to be more upmarket offerings. The food outlets are more sophisticated because people are spending more time at airports. The fact that they can eat nicely and shop well makes a satisfying combination.
People now want healthier options. Years ago it used to be greasy burgers or pizzas. But we sell a lot of porridge because people now enjoy starting the day in a healthy way. Our current strategy is working smoothly and we have just gone into Gatwick with the same proposition.
Marketing and insight director
As the research points out, understanding passengers is paramount. We put a huge amount of effort into gaining insight into who they are, where they are coming from and where they are going. As a result, we have slightly different retail offers in each terminal depending on the mix of passengers there.
What we are doing in terms of shopping at Heathrow has to be ’on the way’ of the passenger journey rather than ’in the way’.
The research points out there are different types of passenger coming through the airport and if you are a frequent business passenger, you typically don’t shop each time you travel because you have other things on your mind.
There is a lot of emphasis put on making people who browse become more regular purchasers. That also includes those passengers who have a lot of time or the business traveller who tends to go straight to the business lounge.
The report highlights the increased practice of putting strategically placed promotions on display as soon as people go through security. However, we don’t do that because it goes against our mantra of things being in the way.
Group marketing director
CL World Brands (alcohol portfolio including Angostura Bitters and Monnet cognac)
Travel retail has always been hugely important to the drinks business and will continue to be.
There is an interesting thought in this research in terms of the business travellers, who logically should have money to spend but go straight to the lounge. It is interesting that lounges have not thought about an opportunity to sell product there too.
But the challenge with that strategy is that people go to the lounge because they want to get away from it all. Marketers have to balance the tension of business travellers wanting peace and quiet with creating a sales opportunity and weave in purchase into the experience.
This insight makes me think much more about the notion of partnership marketing where brands would have to work with the airlines to create some sort of experience where you can sell product.
But this would most likely involve exclusives and brand owners might want to avoid doing them because they are not as profitable as other types of sale.
British American Tobacco
The airport is a very different environment to any other. Brands do things in a big way and consumers accept that things are marketed differently there. About 75% of the people there are once-a-year travellers so they are very excited in the ’happy hour’ where they are waiting to take off.
Our research shows that consumers walk into airports with around eight different motivations. Like this research, we understand that it goes from “fast and functional consumers” to “browsing consumers”.
Airport shopping is unique because people’s behaviour is so different. They might go out and buy aftershave, 200 Dunhill cigarettes, a watch and an iPad in a matter of 50 minutes.
Travel is changing and the booming economies of Asia are important to our sector. We see the highest number of gifting purchases with the Asian consumers of our brands. As a result, I think that premium shopping will come to the fore and is doing so in the way we market.