Travel Retail: all brands on board

The world of travel retail has been receiving its fair share of interest recently – and with good reason. Global travel revenue, including duty-free sales at airport stores, has tripled over the past 15 years to $69 billion in 2017. The duty-free market hit $76 billion just a year later. With these kinds of figures coming through, operators and brands alike are scrambling to get on board.

Investment in the travel retail sector is sweeping across all major transit hubs around the world – Singapore’s Changi Jewel airport has just opened, with 280 retail and food-and-beverage units, and London’s famous Waterloo station is set to transform the former Eurostar terminal into a retail complex by 2021. For established hero hubs, the numbers are healthy: Heathrow Airport has reported 3.4% retail revenue rise in the first half of 2019, an improvement set to be as strong if not stronger than its ‘best year ever’ – 2018.

From Moncler to Colgate, brands are expanding their presence in travel retail – so what’s driving this interest and what does the future hold?

A captive audience

There’s something about a captive audience with a discount guarantee that has helped brands succeed in travel retail. Not to mention, most purchases can be fuelled by a last-minute need or impulse in a comparatively limited retail offering.

Let’s look at WH Smith’s success in the travel retail arena: on the high street, each of its product verticals (stationary, books etc) has competitors of its own a few doors down, not to mention the ease and choice readily available through eCommerce. In travel retail, it’s secured a strong position as the convenience stop of choice for travellers wanting to quickly stock up on reading materials and snacks.

However, the captive mindset of travelling shoppers and attractive price discounts simply won’t be enough to sustain it into the future. Price is still an important factor and will remain so for those interested in trading up products or replenishing beloved supplies. But faced with tightening government restrictions, the prevalence of eCommerce and improvements within the travel industry, the duty-free proposition has become a hygiene factor rather than a true differentiator.

Consider that 90% of shoppers now check prices online while browsing in airport stores. For them to actually spend more and for retailers to successfully recruit new shoppers, value will need to be creatively explored.

The future is experience

Travel retail will soon belong to brands that explore value in more creative ways through the lens of experience – those that truly become a delightful part of a traveller’s journey. There is now a real challenge for brands to compete for traveller attention and engagement: how can they attract interest on floor-level, as well as thinking creatively about other ways of building customer relationships? Achieving not only the basic expectation of convenience, but also adding pleasure?

One example of a brand maintaining this balance already is SK-II’s Future X Smart Store. While specific elements help time-pressed travellers locate products easily, other elements in-store such as camera-led technology create personalised moments of genuine engagement and exploration.

Connecting the dots

To deliver convenience and experience harmoniously, brands must look inwards to evaluate the way they approach and position travel retail within their business. While well-established brands may have a natural advantage when it comes to presence and negotiation power with third-party retailers, those with the best commercial performance value travel retail as a solid and important channel in their wider mix, equipped with strategic communications and loyalty initiatives.

By valuing the channel as a central part of the wider retail strategy, a brand can better focus and invest on the customer experience before, during and after the purchase journey, making sure the dots are connected beyond the gates.

It will also impact the metrics used to measure success – the business objectives of travel retail are changing. While traditionally it has been treated commercially as a volume-driven discount channel, groups like Estée Lauder, Diageo and Mars are beginning to look at it as a valuable source to improve brand love, awareness and new customer recruitment. It’s absolutely the right move; according to the UNWTO, in 2018 alone there were 1.4 billion tourist arrivals internationally. Roughly, that’s a reach equivalent to 1 in 7 people in the world population; or the entire size of China. For those in the long game, it’s as valuable to consider the media value of travel formats as it is direct sales within the wider ecosystem of the brand.

Opportunities for the future are challenging industry heads to view travel retail with fresh eyes: moving away from its status as a warehouse channel, to a very valuable hub primed for discovery, engagement and experience.