On The Horizon: Travel Retail
Brick-and-mortar retailers struggling in traditional malls of yesteryear should look no further than the skies for inspiration. Don’t let the small footprint fool you … with a concentrated flow of foot traffic, airport retailers have an opportunity to create a memorable impact on a global audience, that they may never get online or in a traditional mall.
New airports, growing disposable income in emerging markets, and the expansion of low-cost carriers, are all merging to drive airport passenger volume to an all-time high. With these growing numbers, the airport retail market is expected to reach $125.1 billion by 2023, according to a new report published by Allied Market Research. With historic volume around the world, the focus needs to shift from making money from airlines, to making money from passengers, in terms of commercial revenue, through more engagement with unique retail, dining, hospitality, and leisure experiences. It’s time for a renewed focus on the travel experience. Retailers that focus on compelling environments, localized offerings, and utilize a forward-thinking approach to capture traveler attention, will be better positioned to expand their brand reach and secure consumer loyalty for a future where airports will become the new malls. Brands should focus on these key trends to leave a lasting impression to convert travelers to loyal customers:
Fifty-six percent of global airport users wish to see culturally sensitive and authentic experiences, relevant to an airport’s location. Travel retailers have the opportunity to use this desire to their advantage and create unique experiences, offerings, and partnerships that create a sense of place and cultural appreciation, leaving visitors coming back for more. No longer just transactional in nature, travelers want to make a connection with an interactive, localized experience. The Vancouver Airport recently announced an expansion plan that includes an indoor forest that will replicate the natural habitat of the nearby Gulf Islands. Offering these unique, destination-specific experiences, from cooking classes to virtual reality tours, allow travelers to embed themselves in the culture without ever stepping foot outside the airport.
Creating an Ecosystem
Airports must evolve to become more self-sufficient environments. No longer stuck behind security checkpoints or confined to traditional indoor footprints, airports of the future must be more memorable and develop exciting destination attractions that travelers can actually look forward to visiting. Unlike struggling malls, airports have a constant source of potential shoppers, so the focus will become more about engagement. Just as we are seeing The Experience Economy affect traditional retail, travelers will also seek out more personally fulfilling experiences that enrich them intellectually, emotionally and spiritually. Creating cultural attractions in the form of gaming, farmers markets, museum exhibits, fashion shows, or film festivals – both pre-and-post-security, invites travelers and locals alike, to see the airport as a memorable and unique destination.
For leisure and business travelers alike, there is a clear desire for the earliest possible removal of stress. Achieving this implies making the airport environment part of the overall experience, rather than a step in the process to the experience, and transforming the airport into an elevated and authentic destination in its own right. With 82% of global travelers requesting more spa options, airports should be expanding their service offerings to include wellness to better cater to stressed travelers. Brands like Roam Fitness allow on-the-go travelers to fit in a workout around their flight schedule. Indoor tracks, rooftop gardens, terminal step counts, and yoga rooms are all ways to embrace this healthy initiative.
Today, smartphones are being carried by over 98% of airline passengers. This reliance provides proactive brands with a unique opportunity to utilize adaptive technology to create a more engaging and customized experience for travelers. Airports can create dynamic experiences through environments that adapt to the customer mood, flight schedule, location – and even weather. Brands using beacons could push sale notifications to those customers in the terminal that are experiencing flight delays. Virtual shopping walls could adjust merchandise dependent upon the surrounding traveler destinations. Brands need to be able to anticipate traveler’s needs, whether through data or environmental context, to create stronger brand loyalty, by proactively offering a service, solution, environment or product that is going to help with a passenger pain point.
Home Away from Home
Globally, the average time spent at an airport is 133 minutes, not including layovers and delays, so brands need to find better ways of replicating the comforts of home. Provide traveler’s space to call their own – to relax, dine, be entertained – or even sleep, giving consumers more control over their airport experience, to align with their traditional at-home lifestyle. Just as consumers are comfortable getting their food delivered by popular apps like UberEats or Grubhub, passengers at Baltimore-Washington International airport now have access to Airport Sherpa, an app that allows you to order meals to a designated spot in the airport, including your gate for a little pre-boarding snack. Airlines are starting to appeal to travelers personalized needs by offering services that bring home, to the airport: click-and-collect groceries, private dressing rooms, on-site clothing rentals, and family-friendly amenities, where travelers can recharge and make the most of their time away.
As a Senior Brand Experience Marketing Manager at FRCH Design Worldwide, Emily Hamilton bridges the gap between brand strategy and communication.
Looking at all experiences through a marketing lens, Hamilton’s background of web design, social media, and intellectual property strategy, lend itself to all things digital. Her fascination with retail trends propels her to uncover needs, desires, and opportunities in the industry to translate into actionable implications for brand experiences.
Hamilton has spoken at leading retail design conferences including GlobalShop and has had the privilege of collaborating with a wide range of brands, including American Girl, Hilton, Zales, Scripps Networks Interactive and Forest City. She is a graduate of Miami University, with a Bachelors of Arts in Social Psychology.
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Top 10 Retail Predictions for 2018
It’s February again, and we all know what that means. It’s time to bundle up and check out our Top 10 retail predictions for the year ahead.
1. Even more stores will close. We think just as many — and probably more — will shut their doors this year. But we also think retailers will head into those tough decisions with eyes wide open. In 2018, retailers will continue to trim the fat and run store closure programs that squeeze the most value possible.
2. Rising costs threaten to crush margins. Rising inflation, labor costs, omnichannel investments, and price pressure from Amazon and off-price stores are chipping away at already razor-thin margins. But there’s hope. The boldest retailers will turn to automation and outsourcing to cut costs aggressively and boost profits.
3. Speedy retailers get even speedier. What was considered fast 10 years ago is now glacial. Retailers used to take a full year to bring a product to market. Now, some retailers — not just fast fashion — are doing it in 10 weeks. We expect many retailers (including established ones) to cut down product development time by as much as 75% this year.
4. … making inventory levels drop. A faster product development cycle means retailers won’t be hoarding inventory and then selling it at deep discounts. Instead, they will shift from buying in bulk each season to buying more often in small quantifies, and eventually move away from a seasonal calendar. That approach makes it easier to buy products closer to the in-store date, which leads to better predictions of what is going to sell and fewer markdowns at the end of a season. This means we’ll be less likely to see Eagles Super Bowl merchandise marked down in stores in March — so good news all around!
5. Renting on the rise. The rental market is heating up — and we don’t mean apartments. Businesses that give consumers the option to rent or share products instead of buying them will get even more popular this year (especially among Instagram-hungry, cash-poor millennials). But consumers won’t be the only renters on the market. Retailers have always outsourced some processes, like distribution, but we think they’ll “rent’ more outside resources to work on core processes like product design and development. This could help move from a fixed to variable cost structure.
6. Supply chain investments pay off. Everyone knows Amazon set a high bar for logistics, which they are anticipated to raise again with their Shipping With Amazon service. While some retailers are crumbling under the pressure, others are being clever and creative with their supply chains, using vacant retail real estate to handle e-commerce delivery, making big CAPEX investments in warehouse automation, thinking about acquiring transportation companies, and investing heavily in 3PLs to manage returns. We think those who invest will see their own happy returns this year.
7. If you can’t beat ‘em, join them. Retailers are under enormous pressure to compete online. But e-commerce doesn’t come cheap or easy. This year, more retailers could get around antiquated systems and old ways of thinking by acquiring or partnering with born digital start-ups that already have those critical skills and processes. We expect brands to join the Amazon marketplace after playing hard-to-get for years (cough, Nike) and predict other traditional retailers will get cozy with digital natives (like Target and Shipt).
8. Adding a human touch — without humans. Retailers have been getting better at using technology to offer a personalized customer experience online. But this year, they’re going to take it to the next level by relying more on chatboxes interacting with customers in text messaging apps like WhatsApp and Facebook Messenger.
9. Amazing in-store experiences. “No one wants to shop in stores anymore,” people say. Well, we disagree. We think savvy retailers will come up with new reasons for people to stop by. In-store entertainment and special services should become big priorities. In fact, more stores won’t hold inventory at all and will simply become “guide shops,” where consumers can touch the products and sales associates can educate customers.
10. Elephants (finally) learn how to dance. Competition from start-ups and digital natives poses an existential threat to established retailers. For traditional retailers to survive they need to embrace a new attitude to risk, innovate, and break old rules. We see retailers saying goodbye to their “gut” and hello to data to drive decisions — like the data-led Stitchfix.
Joel Bines and David Bassuk are the global co-heads of retail at AlixPartners, the global, multi-industry consulting firm.
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