Proactive airport retailing management: evidence and suggestions from nearby industries


Airports’ non-aeronautical total revenues are highly correlated to traffic flows. It is no surprise then that those airports with reduced movements would be generating lower incomes. Evidence shows, however, a good amount of airports coping with decreasing traffic but stable or even increasing returns from non-aeronautical activities. This suggests that temporary or even structural downturns in aviation flows can effectively be offset by innovative airport commercial policies.

As a starting point, the airport management has to recognise that it is tackling four different levers of competition for its retailing mix. A first one – which we may call upstream competition - comes from high-street retailing or luxury encounters located in the airport’s reference town. In a broader sense, we may also consider an outlet’s value proposition when this one is located in the airport’s primary catchment area. A second one (called direct competition) is represented by a shopping mall located in the airport’s immediate proximity: this competition will probably be most painful in the case of landside offer related to local residients’ purchases. The third and fourth competition drivers (downstream competition) are generated, on the one hand, by airlines, through the sale of duty free/duty paid categories on board their aircraft. On the other hand, downstream competition is related to another airport’s attractive retailing offer, most definitely in the case of a passenger’s stopover at a major global primary platform with an extensive proposition and even lower taxation levels: let’s think at the case of Middle Eastern and Gulf hubs, for instance.

Moreover, the airport retailing success is strictly impacted by the conduct of security operations: lenghty procedures will cannibalise time for shopping and putting as well customers in a negative mood which will frustrate their shopping propensity. In some cases, airlines as well impose restrictions, as in the case of LCCs' "one bag rule" policy, even if some proactive airports have been able to manage and solve this issue.1 On the contrary, all these regulations are absent in shopping malls and in outlets, where the entire infrastructure is at the service of maximizing the consumption experience. This is, moreover, confirmed by the evidence that shopping malls/ outlets' propensity to buy in Europe is rather high (85% of visitors make at least one purchase and the average per-client transaction is around 60 Euro), while airports manifest an opposite situation, with conversion rates and average expenditures much lower.

Allow passengers time to shop
In this sense, the first challenge for airport operators focused on maximizing non -aeronautical revenues refers to maximizing passengers’ dwell time, through a reduction of processing times at security checkpoints and cooperation with carriers for softening of their operational caveats: for example, by extending check-in desks’ opening times or increasing innovative baggage drop points; by improving the number of security filters also in off-peak times, as at Manchester airport; or by locating in different locations – for instance, close to gates, as in the case of Copenhagen - passport control kiosks. Shopping malls, outlets, but also theme parks are best-in-class benchmarks that have hardly worked to increase their operational efficiency and reduce any "bottleneck ", despite a client’s standing time at shopping malls higher than the actual airport passenger’s dwell time.

Align supply and demand
Another element of diversity between a shopping mall and an airport lies in the different purchase mood by their clients. Individual’s primary goal at a shopping mall is shopping. At airports the motivation spectrum for buying is more complex: time saving, impulse, emergency purchase, seldom rock-bottom pricing.2 Moreover, the airport tenants’ mix may be more limited also because the travel retail channel does not yet fit in all brands’ strategies, or the targeted company is different from the average traveller’s profile, or the store space is limited. Actually, many major brands will never be lured in operating there - except in the case of pure visibility initiatives and zero revenue for the landlord - in the absence of an effective guidance and support mentoring by the airport operator. Eventually, the product category may not be suitable for the context of airport shopping, like in the case of big bulks.

Here the airport operator’s managerial problem arises when the brand presence of and retail mix are not perfectly calibrated with the passengers’ profiling: in the best scenario, this condition will generate a very conservative path in non-aeronautical revenues’ development. A second element of learning for the airport management is thus the need to invest an important flow of resources on passengers’ research studies, by either getting opinions on the existing proposition and by gathering inputs over most evoked and desired brands and offerings. Both shopping malls and outlets today perform daily research studies on their clients by using a combination of offline and online tools.

Terminal layout
A third element for innovation in non-aviation formats is represented by a “commercial-driven” projectual design of infrastructural spaces. Airports should not be lulled out of self-imposed constraints related to both aesthetics or minimization of boarding times imposed by the aviation function. They must, on the contrary , develop layouts that maximize retailing yield from passenger flows: solutions like walk-through designs (not only for duty-free encounters), wait in lounge and time-to-gate designs are definitely able to boost airports’ profitability, with an overall limited impact on aviation-driven operational caveats and conducts.

1. AENA, for instance, has made an agreement with LCCs operating at its airports which allows passengers to bring on board one shopping bag with purchases made at its encounters on board with no fee.
2. Actually clients’ perception is that airport offer for any product is more expensive than other locations’ one.

Professor David Jarach is the managing partner of diciottofebbraio, a specialised aviation, aerospace & defence consulting company that has been working with major industrial and financial players since 1999. David Jarach is also Professor of Marketing, Marketing Management-Advanced and Pricing Management at Bocconi University, Milan and senior Professor of Marketing at SDA Bocconi School of Management. He has published five books (in italian, english and chinese) about the airline and airport industries and published dozens of managerial articles on the main journals and industry magazines.

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