Lois Larson
Airport stores charge significantly more than regular stores. This is due to a combination of factors, including high rental costs, supplier markups, employee turnover, parking fees, and security measures. Airports often take a cut of gross sales, so retailers have to increase product prices to maintain profitability. Additionally, there is a lack of competition within airports, allowing vendors to set higher prices. These factors contribute to the high prices charged by airport stores.
| Characteristics | Values |
|---|---|
| High rental costs | Commercial space rental at airports is more than double the average cost of Class A rental space in the Portland, Oregon area. |
| Portion of sales | Airports charge a portion of total sales, so the more money the retailer earns, the more they pay to the authorities. |
| Lack of competition | Airports are high-security areas, and most people don't want to leave the airport once they've passed through security. This means businesses can charge more because they know people are willing to pay. |
| Supplier markups | Suppliers often charge higher prices to businesses operating inside an airport. |
| Employee costs | Airports are often situated far from city centers, so companies have to pay a portion of employees' daily travel expenses and higher wages. Employee airport parking is another significant cost. |
| Security measures | Post-9/11 security measures add constant costs for airport businesses, including extra labor costs for additional training and security checks. |
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What You'll Learn
High rental costs
Commercial space rental at airports is more than double the average cost of Class A rental space. For instance, the commercial space rent at Portland International Airport has a minimum annual guarantee of $80 per square foot per year. The high rental costs are further exacerbated by the limited amount of space available at airports, which restricts competition and gives retailers an advantage. The high costs of operating at an airport are passed on to consumers in the form of inflated prices.
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Lack of competition
The high prices at airport stores can be attributed to a variety of factors, one of which is the lack of competition due to their monopoly-like status. Airports are high-security areas, and travellers often have no choice but to buy from airport stores, especially after they have checked in and passed through security. The inconvenience and time taken to leave the airport and search for alternative options outside make staying within the airport a more attractive option for many travellers. This captive market allows airport stores to charge higher prices.
Additionally, the limited space within airports restricts the number of stores that can operate, reducing competition and giving retailers an advantage. The high demand for convenience and the willingness of travellers to spend more also contribute to the lack of competition.
The absence of competitive pressure enables airport stores to set higher prices without losing customers. This dynamic is further exacerbated by the fact that airports often charge a portion of total sales, leading to higher rents for retailers. As a result, retailers pass on these increased costs to consumers, contributing to the overall higher prices at airport stores.
Furthermore, the unique challenges of operating within an airport, such as additional security measures and employee parking fees, contribute to higher operating expenses for airport stores. These costs are then reflected in the prices charged to customers.
While airports may impose regulations on price caps, such as "street pricing," these restrictions are often not effectively enforced. This lack of enforcement allows airport stores to charge prices that far surpass the street pricing limits, further exploiting their position in a market with limited competition.
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Supplier markups
The high prices at airport stores are partly due to supplier markups. Food wholesalers and suppliers know that airport stores, especially those past security, have a captive audience. They are aware that these stores are often a customer's only option, so they hike up their prices.
Suppliers also know that airport stores are busy and that many people associate airports with high prices. They assume that businesses make millions, so they price their products higher for business owners operating near airport terminals. This cost is then passed on to the consumer.
The cost of delivering goods to airport stores is also higher. Suppliers have to navigate the complexities of airport security, which can be a headache for businesses. This includes the cost of an off-airport warehouse and a delivery system to get products to the counter.
In addition, airports are often situated far from city centres, so suppliers have to pay employees' travel expenses and higher wages. This increases operating expenses, which are then passed on to the airport stores and, ultimately, the consumer.
The high prices at airport stores are, therefore, partly due to supplier markups, with suppliers taking advantage of the captive audience and unique operating conditions of airport stores.
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Transportation costs
Moreover, due to limited space at airports, businesses have reduced storage space compared to typical commercial spaces. This means they may have to pay a premium for extra storage space within the airport or incur additional transportation costs by renting storage space outside the airport and arranging multiple deliveries throughout the week.
The high turnover rates and employee retention issues at airport businesses further contribute to transportation costs. When businesses have to deal with turnover, they incur higher costs for recruiting, hiring, and training new staff. These costs, along with other operational expenses, are factored into the final price of the products, ultimately borne by the customer.
The unique nature of the airport environment, with its security measures and lack of nearby competition, also plays a role in the increased transportation costs. The constant presence of security checkpoints adds logistical challenges and labour costs, as employees need to allow extra time to get to work and pay for parking.
Additionally, airports often charge high rents to vendors, and these costs can increase as the store's revenue grows. This creates a situation where vendors must set higher prices to cover their rental expenses, particularly if they have a physical store within the airport.
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Labour costs
To meet demand, employees often have to undergo special training programmes, which adds to the cost. Many airport jobs are unionised and pay higher wages than similar jobs outside of the airport. This means that a portion of the wages paid to labour is passed on to the consumer in the form of higher prices.
The high labour costs associated with airport stores are, therefore, a significant factor in the high prices of goods at these locations.
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Frequently asked questions
There are several reasons why airport stores charge so much. Firstly, airports are usually located far from city centres, so companies have to pay a portion of their employees' travel expenses and higher wages to attract workers. Secondly, airport vendors have to pay high rent and other operating expenses, which are often more than double the commercial rate. Thirdly, airports often take a cut of sales, so the more a store earns, the more it pays in rent.
Many items at airport stores are significantly marked up compared to their outside "street prices", sometimes by over 100%. For example, a 2021 analysis by Dealnews found that 81% of electronics available for purchase at airports were more expensive than the same products outside. Other overpriced items include food, drinks, souvenirs, and gifts.
Here are some tips to avoid paying high prices at airport stores:
- Bring your own food and drinks (where permitted)
- Carry an empty water bottle and fill it up at the airport
- Pack a collapsible bag to avoid hefty baggage fees
