The Retail Planner

Future of Airports webinar: From here to where?

Phygital retail strategies, upending MAG tenancy agreements and rethinking retail spaces for media entertainment zones were just some of the topics that cropped up at the inaugural From here to where? webinar co-organised by retail agency Portland Design and travel retail blog TRUnblocked last month. It was one of the more thought-provoking (virtual) industry events I have attended in recent weeks with plenty of challenging ideas laid down by travel retail stakeholders and decision makers. Here are some highlights. All the sessions are now live to view.

Session 1: Should airports reimagine a different future?

Dealing with the elephant in the room early on, moderator, Peter Marshall, Founder of TRUnblocked asked panellists to discuss: the vision of legacy management at airports for travel retail is outdated.  

Ibrahim Ibrahim, MD, Portland Design: “Real estate managers are all struggling with this; it’s no longer about the value of physical property, it’s about experience and how we demonstrate the impact that physical space can have in the virtual world. The near future will be about how property managers rethink and re-value that property and quantify the commerciality of physical spaces. We need to build new revenue models around this idea. We have to stop leasing boxes with glass fronts, we need to start curating retail experiences. It could be a physical or a virtual experience. We need to rethink fixed-term leases for real estate, a new approach is needed for physical retail spaces away from Minimum Annual Gurantees (MAGs). This world is being disrupted not because of architecture or design or technology, what’s really disruptive is the outdated approach to revenues, lease management and valuation models.”

Dr Lutz Weisser, Managing Partner, adm Sigma Consulting: “For the near future of airports, we’re looking at an integration of spaces that are moving on from the key passenger usage typologies. With the advent of automation in the airport, it will be more seamless – from the check-in area becoming more like a series of hotel reception desks to passing through security which will become more technology-based (face recognition). 

“It’s about different infrastructure strategies: for example, turning on acoustic absorption or distinct fragrances for a more soothing airport terminal experience.  Integrate hard and soft facets in an airport where you don’t need to distinguish between those delineated usage steps anymore. 

“It’s ‘mellow master-planning’, and with more data capture as standard there will be even less hard (security) steps to navigate, so passengers can just roam around for the experiences. Passengers will only have to cross one hard security hurdle in the whole experience.

Polly Barnfield, CEO Maybe: “Airports know the consumer has a device you can always communicate with, so one scenario could be about creating bookable experiences, use the luxury of time to offer pre-book appointments for amenities, retail experiences, so that the whole time a passenger spends at the airport can be curated. Without missing my flight, my time there can be more valuable and personalised. It gives brands a way of understanding passengers’ needs. 

“The commodity that airports have is being in the position to serve those passengers the most efficient way as they go on their journey. Then they can generate quality data that gives a better understanding of what consumers want and airports can create better frictionless experiences that make people want to come back to that airport for a high value experience. 

Ibrahim: “Pre-booking experiences will be key. Airports should be planning for a new ‘By Appointment Economy’: curated and bookable retail experiences that are the new normal driven by Covid. The mainstreaming of premium services will become habitual and expected. 

“Retail has always been about four things: recruitment, transaction, fulfilment and retention. More space will be used by brands as customer recruitment platforms; to drive customers to social platforms or online commerce. Those kinds of spaces will behave more like media brands. That requires a new valuation and how that media platform measures its ability to drive traffic to social platforms, to become a halo and drive media impressions. There’s an opportunity to measure that by capturing the data. Retail will no longer be measured by square footage instead it will be measured by media impressions. 

“If an airport reconsiders itself as a global media platform, it would attract brands from entertainment, broadcast, culture and e-gaming industries to experiment there, not just traditional retail.

Session 2: A changing environment, what is going to work?

Lewis Allen, Strategy Director, Portland Design set the tone with the call to arms: “There’s demand for much more flexibility of airport retail spaces. Airports need to have a more progressive mindset; to know what to do with retail, what is the content that fits into empty spaces? 

“This idea of shifting gear to make change, fundamental mindset change, the cultural idea of how to curate the commercial experience. This is the biggest single thing that needs to happen. If that means more experimentation, then so be it. And if that also means there’s a new guarantee that there is no MAG then that’s a good thing. You can’t base every decision you make [as a retailer] on the idea of certainty and that’s the new reality. That will be a fundamental win for this industry. Expectations may be lowered around revenues for the near future, but it’s more about learnings for change.”

Miya Knights, Head of Industry Insight, Eagle Eye Solutions: “Where we are with [domestic] retail now, there’s a lot that airports can learn from. For example, failing fast. Using those digital tools to stand up an idea without going full roll out. Retailers have used cashless stores to test and learn how people behave in a convenience format, this has a lot of application in an airport environment. 

“Airport retail is really challenged right now – all the metrics are under question – so perhaps there needs to be less reliance on physical formats and more experimentation with pop-ups. Direct-to-consumer brands would be in a good position to test out new locations at airports, they would welcome the opportunity to market to such demographically diverse audiences with relatively low risk and low expenditure for infrastructure should the spaces become available.

Rory Sutherland, Vice Chairman, Ogilvy UK: “Airports could be designed around the idea that the future of retail is bifocated. Amazon has stripped away the need to browse and instead we shop in a functional way with targeted offers. Or, it’s high-end and highly experiential. What always dies is in the middle. 

“Every airport needs to decide between convenience and luxury. They’re stuck between these two places – they neither do value and frictionless retail well or experience well because usually they don’t invest enough in either proposition. Every airport needs to decide what is their best opportunity. It’s about choosing between logistics and storytelling.”

Allen returned to the issue of MAGs again: “Partners need to release some of those roadblocks, there are alternative, new collaborative revenue models possible, but there needs to be experimentation as part of the process. Enabling change will be key. It’s about giving commercial teams new expectations. It’s about having confidence to move forward with new strategies to drive new business models. The future success is not going to come from a copy and paste of the past.”

Session 3: Can we learn from the high street?

A homogenised high street has long been an issue for Mary Wallace, IBM Global Business Processes: “One of the big mistakes of the high street was that bigger always meant better and it all ended up looking the same, making it all more convenient. Consistent pricing hid the real value. People got bored, distracted and they started looking elsewhere. But people don’t want the same everywhere, they want to see local ideas and individualism.

“The idea of getting stuff cheaper online has changed for local high streets, it’s something that happens in a physical store. But that barrier to purchase now happens at the airport, where people do ‘travel-maths’ and they try to work out the currency conversion or the price saving. The notion of cheaper is better is being opened up – as consumers we’re rethinking what price and value really means.”

Kim Gray, Director Business Developments Airports & Travel Retail Europe, Unibail-Rodamco-Westfield: “There’s a lot to learn from the high street. We’re seeing an acceleration of what has been happening in the high street in the airport, one of the problems in GTR is that there hasn’t been that burning platform that the high street has had to be. But now is that time. 

“The airport needs to create more flexible spaces, airport owners need to create excitement how to flip and change up retail, how to make it not expensive to run temporary retail spaces. Look at Tiffany & Co [in Covent Garden] as an example: a low cost fit out allows it to showcase the brand to new demographics, new audiences.

“The challenge for airports is to have that level of flexibility. Airports have more onerous security and logistics challenges and they can be difficult to deal with – but there needs to be a balance. There needs to be a mix of global brands that have a clarity of offer, consumers know what to expect every time. Airports should segment the offer and aggregate the brands that create personality. They will become a great sense of income for the airport. It’s that community offer on the back of big service retail offers. 

“Moving between physical and digital: e-commerce is driving new behaviour in the high street. E-commerce has become more like the democratisation of retail and GTR needs to follow suit. A lot of the innovation and new business models are happening at the smaller end of the high street, where brands are using e-commerce as an overall new proposition, they’re learning faster how to operate with those customer expectations in mind. It’s a sea change in how to approach commerce as a whole. They’ve kicked the trend of big retail. The new kids on the block are setting up new brands, new ways of operating, redefining the way people shop. They’re creating new partnerships and value exchanges that are based on more even relationships – equal footing between consumer and retailer.”

Lewis Allen, Strategy Director, Portland Design: “This is another opportunity to learn from domestic retail. It’s about that curation of tenants, brands and concessions that mean we can look to a broader portfolio; include new start ups, new behaviours, new mindsets. 

“Airports have more financial constraints. They might have more space, but there are tighter productivity or profitability expectations. So, it can be quite risky to bring in new kids on the block when there are profit per sq ft expectations. Flexible white spaces will need to be used to harness the power and innovation of upstarts, but with an overarching management system in place.”

Session 5: Business partnerships under pressure; new commercial pillars and principles

Francois Bourienne, Commercial Director, AGS: “Customers are back, they are spending, they still have appetite to spend, but the volume is not there like before. There is a back to basics approach – between airports and travel retail concessionaires. The biggest growth opportunities will come from new win-win partnerships. We will need to fully understand the position of the other party. The attitudes have changed dramatically from six months ago. We are now thinking long term, not short term.

We’ve done more original deals with new shares on different categories, it’s now about sharing the downsides, to get our partners back on their feet. It’s about support and trust to invest in the future.

“We all need to develop new ways of promoting duty free, doing deals with opportunities, going back to localised promotions and reasons to shop the channel such as exclusives. With competitive prices and aggressive three for two offers – to drive purchasing.  If we need to sacrifice a big margin (for retailers) or operating cost (for airports) but we generate more volume, then let’s do it to encourage people to buy in duty free because it’s still good value and there are products you can’t find elsewhere. 

Airport retail needs to mimic the way people have taken to shopping online during the pandemic. Travel retail needs more opportunities to pre-book, promote online shopping, try more concepts, take more risks. Airports shouldn’t be afraid to try out new ways of shopping in duty free, even if it means losing out on rent for the short term.”

Martijn Steur, MD Kinetic Consultancy: “Airports need to start focusing on their strengths. I hear a lot about the digital game but it’s not just a paint and brush approach via Instagram. We can’t be compared with Amazon. However, we have a key strength that we were one of the first retail channels. We need to reinterpret this physical strength, look again at this fiscal environment in real terms, and choose partners that understand the physicality of this channel. 

“The game will be more about how to engage people in our joint space – being a club of brands for people to engage with in the airport. A platform about from eyeballs to trials rather than from footfall to sales. Which is a change of business model and a new approach on the customer base.

“If we look back before Covid, the model was already under pressure, but now it needs to be shaken up. Currently the business model is proving to be a business constraint. There is room for new business models, especially with high MAGs. For airports we’re kicking the can down the road. We can’t have just five or ten year contracts anymore. If we are to innovate the pace needs to be faster and business contracts need to adjust as well”

Peter Marshall, TRUnblocked: “People are talking up agility, there’s no more room for legacy management. There is legitimacy to look at the length of contracts in our new normal. For those who are flying, they are spending more than they did before. Airports have to be faster at reacting to new customer needs.”

Session 6: How doable is digital?

Stéphanie Metz-Thevenod, Executive Vice President Marketing and Digital, Lagardère Travel Retail: “Is digital going to answer better our business customer and consumer expectations? It’s a big topic, and for sure, yes.

“There are three different ways to look at it:  we have been investing more in click and collect / shop and collect – it’s a limited business for today but there’s a big opportunity to see it grow; what is important in-store now due to Covid – interaction on the shop floor and how to empower our staff; our ability to optimise our operations, thanks to big data, new algorithms will help us to be more precise in the retail we deliver to the airport, we need to seize more customers, and do it via new data analysis. 

“We have revamped our digital strategy due to Covid. Our whole operation has changed since the pandemic, we are doing much more testing, which today has to be very quick.”

“Covid has accelerated digitalisation – in Paris traffic is still down 70%, there are a small number of PAX in the airport, today only 20% of those buy in duty free. So, we need to increase dramatically the conversion. 

“We need to reach them before they get to the airport, that’s why we are investing more in click and collect. We work with apps that connect with the travel ticket , we need to invest in merchandise promotions to try before you fly. 

“We need to join the dots, to partner with brands that have a direct link to the passenger; the airlines first then the airport. We try to work with stakeholders in the travel retail ecosystem, but it needs work to reach people before they fly. I wish we could do more with airlines.

“So far, the travel retailer is not top of the list for airlines. We need to bring added value to an airline. For example, if you sell a flight ticket that includes a price benefit with Aelia Duty Free, maybe 10 euro on a 60 euro ticket, it’s a big part, but we need to be more tactical with the value proposition. We need to create more revenue for airlines, it can be a win-win situation.”

Melvin Broeckaart, Founder Aircare: “Digital is so important for the airport proposition. Once people get there, they think about how digital helps them. Airport retail is a physical business and airports need to use digital to help people on that physical journey – to truly experience the airport in the best possible way, to support passengers to give them the most useful and convenient experiences. For example, finding time to shop before they get to their gate, or helping them find interesting things to do in that 30 minutes of dwell time.” 

Stéphane Zermatten, MD, Circle Square: “Digital starts way before a passenger gets to the airport. We have an industry that will now be suppressed for two to three years, so you need to work on footfall and convergence and engage consumers as much as possible before they get to the airport, between one or four weeks, bring them to your brand work online, and try to engage them there, drive marketing traffic to your e-commerce website and then to the physical store at the airport.”

Michael Raasch, Head of Airline Solutions, AOE: “From the airlines’ point of view, the search and booking of a flight, it all starts much earlier, so you need to start talking to them early. Really, we need to create just one platform. It’s about how to bring them all together. One of the upcoming key issues will be having an end-to-end platform; enabling airlines and airports to capitalise on PAX [number of passengers], both need to find solutions to create ancillary revenues [again] and work with PAX. 

“Digital for travel retail starts much earlier, when passengers start thinking about flights. People ask, what are the purchases I can plan for at the airport or on board the airline?

“We need more meaningful collaborations. For airlines, there’s a lot of potential, because there is value to leverage from the passenger data first and then from loyalty programmes, where passengers can redeem points for purchases.”