Ruth Haines
Airports have become the new malls, with retail therapy being the second-biggest source of revenue for airports, and the leading source for London's Heathrow Airport. The rise of budget airlines and the increase in international travel have opened up new opportunities for retailers to reach audiences they might otherwise have missed. With malls and brick-and-mortar stores struggling, retailers are focusing on winning customers at airports, where travellers are in the right mindset to shop and are more likely to make impulse purchases.
| Characteristics | Values |
|---|---|
| Airport foot traffic | Consistent foot traffic, with 60,000 passengers a day at Pittsburgh International Airport alone |
| Retail opportunities | 100 retailers at Pittsburgh International Airport; sales per square foot are three to four times higher than other locations |
| Customer demographics | Higher purchasing power, with time to kill and money to spend |
| Business opportunity | Retailers are saturating malls and downtowns, and airports provide a new opportunity |
| Airport revenue | Global travel revenue, including duty-free sales, tripled to $69 billion in 2017; expected to increase with growing air travel |
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What You'll Learn
- Airports are a captive market, with a built-in user base
- Retail is a way for airports to recoup costs and contribute to operating margins
- Airports offer a unique opportunity to reach a wider audience
- Airport stores are profitable, with higher sales per square foot than other locations
- Travellers are in the right mindset, open to discovering and exploring new things
Airports are a captive market, with a built-in user base
Airports provide a unique opportunity for retailers to reach a diverse range of customers, including those who may not typically frequent malls or downtown shopping areas. Travellers tend to have higher disposable incomes, as they have money set aside for their trip or have their travel expenses covered by their employers. This makes them more likely to purchase luxury items or indulge in duty-free shopping. Additionally, the time spent waiting for flights or during layovers encourages passengers to explore the airport's shopping options, reducing the need to visit malls in their leisure time.
The airport retail industry is growing exponentially, with global travel revenue, including duty-free sales, tripling over the past 15 years to $69 billion in 2017. Sales per square foot in airport stores are often three to four times higher than in other locations, even when prices remain competitive. This presents a lucrative opportunity for retailers, especially those who have already saturated the market in traditional shopping areas. For example, brands like Brookstone have closed down numerous mall stores while keeping their airport locations open.
The success of airport retail can also be attributed to the convenience it offers travellers. Passengers can purchase items they might need for their trips, such as last-minute gifts or additional luggage, without having to deviate from their travel plans. Additionally, some airports offer unique shopping experiences that reflect the flavour of the region, providing travellers with souvenirs or items they may not find elsewhere. Overall, the captive market of airports, combined with the increasing foot traffic and changing traveller demographics, makes airports an attractive and profitable venture for retailers.
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Retail is a way for airports to recoup costs and contribute to operating margins
Airports are increasingly becoming retail hubs, with many travellers noting that they now resemble malls. The airport retail industry is growing, with global travel revenue, including duty-free sales, tripling over the past 15 years to $69 billion in 2017. Airports are attractive to retailers because they offer a captive market, with many travellers and limited competition. This means that sales per square foot can be three to four times higher than in other locations.
Airports are also attractive to retailers because they provide access to a specific demographic. Travellers tend to have higher incomes and more disposable income, making them ideal customers for luxury brands. Additionally, travellers often have time to kill before their flights, which encourages them to browse the airport shops.
The growth of airport retail has led to a range of stores and restaurants setting up shop in airports, including well-known brands such as Starbucks, Hugo Boss, and Michael Kors. Some stores, like Altitunes, even operate exclusively in airports. Airport retailers can also showcase products that can be fulfilled online and delivered directly to travellers, further enhancing their appeal.
By attracting retailers and increasing sales, airports can recoup costs and boost their operating margins. The development of retail spaces in airports has become a strategy for airports to improve their financial performance and provide additional services to travellers.
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Airports offer a unique opportunity to reach a wider audience
Airports have become prime real estate for retailers, offering a unique opportunity to reach a wider audience. With the rise in both business and leisure travel, airports are witnessing a surge in foot traffic, providing retailers access to a diverse range of customers. This captive market is particularly attractive to brands, as travellers often have time to kill and may be inclined to indulge in some retail therapy.
The airport retail industry is thriving, with global travel revenue, including duty-free sales, tripling over the past 15 years. Airports have become shopping destinations in themselves, with some travellers even considering shopping as an integral part of their travel experience. This shift has led to airports undergoing significant renovations to accommodate more stores. For instance, Pittsburgh International Airport, a major hub, was one of the first airports to emphasise shopping, now offering around 100 retailers access to 60,000 passengers daily.
Airports provide an opportunity for retailers to expand beyond traditional malls and downtown locations. The unique setting of an airport attracts travellers with higher purchasing power, including those on holidays with disposable income and business travellers with higher incomes. Additionally, the time spent waiting for flights or during layovers encourages travellers to explore the airport's offerings, reducing the need to seek out malls during their limited leisure time.
Furthermore, airports cater to a wide range of consumer needs. While luxury brands, alcohol, and cosmetics are popular choices, travellers can also find unique regional gifts and apparel, technology, and convenience items. The success of airport retail is evident in the performance of brands like Brookstone, which kept its 35 airport stores open despite closing 101 mall locations.
Overall, the airport offers a distinctive platform for retailers to showcase their products and engage a diverse, captive audience. With the continued growth of air travel, the airport retail industry is poised for further expansion, adapting to the changing needs and demographics of travellers.
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Airport stores are profitable, with higher sales per square foot than other locations
Airport stores are highly profitable, with sales per square foot often three to four times higher than in other locations. This is due to a variety of factors, including high foot traffic, captive audiences, and the unique dynamics of air travel.
Firstly, airport stores benefit from constant and high foot traffic, with thousands of passengers passing through daily. This provides a vast customer base, increasing the potential for sales. Additionally, many passengers are often willing to spend more due to a variety of factors, including impulse buying, vacation mindsets, and boredom during layovers. The captive nature of the audience also plays a significant role, as passengers with time to kill may be more inclined to browse and make purchases.
Secondly, the unique dynamics of air travel contribute to the profitability of airport stores. Passengers may be more inclined to purchase items they forgot to pack or seek gifts or souvenirs for their destinations. Additionally, duty-free shopping can be attractive, especially for travellers with a sophisticated understanding of products like single malt scotches. The ability to showcase products that can be fulfilled online or delivered later also adds to the convenience and appeal of airport shopping.
Furthermore, airport retailers often carry a wide range of high-end products, from fashion and jewellery to cosmetics and electronics, catering to various tastes and needs. The presence of well-known food chains and familiar brands can also drive sales through brand recognition and repeat customers. While running a business in an airport comes with logistical challenges, the potential for high revenue outweighs these considerations for many retailers.
The success of airport stores has not gone unnoticed, with airports like Pittsburgh International leading the way in emphasising shopping. As a result, airports worldwide, including Heathrow, LaGuardia, and Chicago's O'Hare, have undergone renovations to accommodate more retailers. Airport stores have become an integral part of the air travel experience, and their profitability continues to shape the modern airport landscape.
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Travellers are in the right mindset, open to discovering and exploring new things
The airport retail industry is thriving, with global travel revenue, including duty-free sales, tripling over the past 15 years to $69 billion in 2017. This is due in part to the increasing number of travellers, with more than four billion taking to the skies in 2017, up from under two billion in 2002.
A key factor in the success of airport retail is the captive audience that airports provide. Travellers often have to arrive at the airport early due to security measures and face ubiquitous delays, resulting in spare time that can be spent shopping. Moreover, travellers are often in a positive mindset, open to discovering and exploring new things, especially if they are on holiday. This makes them more likely to indulge in impulse purchases or treat themselves to exclusive products.
Montgomery Wilson, head of global travel retail for Brown-Forman, the parent company of Jack Daniel's whiskey, confirms this, stating that travellers are in the right mindset. They are on holiday and eager to discover and explore. Brown-Forman's sales in the travel retail division have grown consistently, reflecting the success of targeting travellers.
To cater to travellers' mindsets and increase retail potential, airports and brands employ various strategies. These include showcasing products with online fulfilment options, delivering purchases to travellers' seats, and creating comfort sections with travel-related items. Additionally, educational signage and cross-merchandising techniques are used to engage customers and encourage trade-ups.
The presence of well-known brands and the convenience of one-stop shopping further enhance the airport retail experience. As malls struggle, retailers view airports as prime locations to reach new customers and tap into the growing travel market. With the expectation of continued growth in air travel, the airport retail industry is poised for further expansion.
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Frequently asked questions
Airports are the new malls, offering retailers new opportunities to reach audiences that they might otherwise miss. Airports have a captive audience, and sales per square foot are often three or four times as high as those for stores in other locations.
Airports already have a built-in user base. Once passengers have gone through security, they are stuck with whatever services, amenities, and retail options the airport provides. With ubiquitous delays and increased security measures, travellers often have more spare time on their hands.
Airport malls tend to include duty-free shops, luxury brands, food chains, and newsstands. Travellers are often in the right mindset to treat themselves or buy gifts for friends and family, so retailers can charge the same prices as at malls despite the higher sales per square foot.
