Travel Retail is taking off

Travel Retail is taking off. The number of travellers is going to continue to grow exponentially in the coming years, airports are expanding rapidly, and duty-free shops are springing up out of the ground like toadstools. The expectation is that the Travel Retail segment will have a value of $80 billion in 2020, growing to $125 billion in 2025.

So in contrast to ordinary retail, outlets at international airports, on cruise ships and in border areas are not doing at all badly. A bonus for brands. Because this shopping channel provides outstanding opportunities to build up the image, launch new products and confront the customer effectively on the retail floor.

A distinct target group

If you intend to take advantage of these opportunities as a brand, it helps to know that travellers behave significantly differently from ordinary consumers. Prior to Customs for example, they are much less sensitive to promotional stimuli than just after they have gone through. The stress level drops significantly. Travellers come out of fight-or-flight mode as it is known and change suddenly into an interesting customer target group. And while many purchases in the domestic markets are planned, the great majority of spending in travel retail is unplanned. No less than 70% is on impulse.

Capi Electronics – impulse driven furniture – Schiphol airport

Take advantage of impulse

The high percentage of impulse purchases offers huge opportunities for known brands that in their home country are outcompeted by private labels or parallel imports from China. You need to take advantage of impulse with confrontation and engagement. Offer the right product, the right appearance and there you are. Don’t waste effort on extended customer journeys or sales funnels – the average traveller only has 60 minutes available.

M&M brandstore

M&Ms – effective combination of brand building and conversion – Hong Kong airport

 But watch out

Just like all other channels, Travel Retail has its idiosyncrasies. You can only take full advantage of the sales potential if you take the following attention points into account.

Attention point 1: conversion is key

The number of flight movements is growing explosively, but sales are not growing at the same rate. In short, the value of the shopping basket is falling. Airport retailers react to this with deep promotions and large discounts, which causes the already small margin for the brands (70% lands in the airports’ pockets) to become even smaller and the value of the basket drops still further. Brands need to search together with retailers for additional reasons to buy to cause the value to rise again.

Johnnie Walker – high end confrontation and storytelling – Mumbai Airport

Attention point 2: digital isn’t yet normal

Unfortunately, there is still no real cooperation between retailers, airlines and airports. A pity, because airports and airlines possess an unsurpassed amount of real-time information about passengers – from age and nationality to current and future locations. For the moment, retailers and brands have no access to this. This makes it hard to target shoppers digitally with personalised offers.

M&Ms – targeted messaging – Schiphol airport

Attention point 3: static business model

Finally, we observe a continuously changing traveller profile. Trends are developing all the time, just as customers’ wishes are, and the business model in Travel Retail is not well equipped to adapt rapidly to this. Retailers therefore need to become quicker and more manoeuvrable to offer the traveller the same digital shopping convenience he is used to at home.

De Combinatie van Factoren helps brands

If you as a brand want to make the leap to travel retail or to grow substantially in the segment, it’s useful to have a creative partner who knows the channel like the back of his hand. De Combinatie van Factoren has already been operating for almost 10 years in Travel Retail, rolling out striking brand activity campaigns worldwide. As well as design, we build and install permanent displays and develop complete brand stores. By applying the right knowledge of behaviour, and translating this into creative work, we make it substantially easier for brands to be successful in this atypical channel.

Want to know more? Then call/WhatsApp/e-mail Martijn Nillesen on +31 (0)6 11041748 or martijn.nillesen@dcvf.nl