That was a question that someone asked a passenger sat next to me on my last flight. It wasn’t some sort of philosophical, navel gazing question. It wasn’t a comment said in jest either. It was a serious question that demanded a serious answer.

As the conversation went on, I gained a deeper understanding of their perspective. The passenger had commented about the brands that can be typically found in the airport. When you look at the airport through that lens, it is understandable as to why the question had been asked. What is there for the every day shopper?

Relative Value

Every passenger going through the airport has their own story. They have their own belief as to what is good value and the brands they choose to buy into. Their personal circumstances are unique, the level of disposable income they have will vary and they will decide how and when to use that disposable income. To some, £100 is a small fortune, to others £100 is pocket change.

Whilst the airport environment offers value, that value is relative. Saving £10 on a £35 bottle of Vodka might be a great saving to those who are interested in buying Vodka. Alternatively, saving £500 on a £2,000 handbag might also be a good saving to someone who might be interested in an expensive handbag. The purchasing power of that individual will also influence whether they can afford to buy the product. Of course, value is a matter of perception.

The current thinking for airport retail is heavily focused on the high end traveller, the top 1% who might shop in Louis Vuitton, Chanel, Tiffany etc.  These stores are a show case for brands where there is a global audience footfall.

Should Prices Be Lowered?

There is another school of thought that believes that prices should be lowered, that those price cuts will drive extra footfall & conversion. Whilst in some cases this may be happen, this is purely a race to the bottom and I would suspect that the incremental value derived through the price cut would not offset the loss in cash generated. Here is why:
Joe is a normal guy. Joe has a good job and a reasonable level of disposable income. He travels twice a year and would usually kill time in the airport by wandering around the shops. He likes the odd drink now and again and will buy the odd bottle of spirits from time to time. He see’s the Rum section and casts his eye across the fixture. Here he sees price off offers.

At what level of saving would be required for him to go from a curious shopper to a buyer on a bottle of rum versus the supermarket? 10%, 30%, 50%? The cost (discounting) to get that person to purchase could be greater than the benefit derived. ​

Airport Retail To Be Torn Apart?

One thing is clear. There is polarisation in our channel. There are those that want to create price transparency and to drive the retailers down to the lowest price. This is a very dangerous position to be in. In the UK, a famous high street chain collapsed due to the pursuit of being the cheapest.

As soon as your brand becomes the subject of price comparison, you have reduced it to a commodity that you might as well just sell on Amazon. The added value that has been built into a brand is suddenly vaporised.

At the other end of the spectrum, you have those that want to move away from price. They want to restore the glamour of the airport, to enable shoppers to find something special and exclusive. The danger here is that it can begin to only target the select few who are able to afford to buy. It creates that perception that only the rich can shop there.

There is however, an opportunity for a 3rd space. More on this another time.

The clear and present danger is the focus on price. If this continues, it could be an industry killer.

Varying Prices

There are lots of very good reasons why product prices do and should vary by location around the world. The cost of getting Malt Whisky to the other side of the world will be very different to getting that same Whisky to a local airport to the factory. Other reasons for price variation include tax rates, storage costs, economies of scale, currency rates, exclusivity and more.

According to a recent focus group we ran, shoppers are tolerant of varying prices and will not demand the lowest possible price at all times. The consensus was that as long the price is at a level that is not too distance from the lowest price, it would be accepted.

The other reason why prices vary? The purchasing power of passengers will vary significantly around the world.
So, back to the question? Do you need to be rich to shop at the airport? No.

Airport retailers such as Dufry, World Duty Free, Aldeasa, Nuance, Aelia, Aer Rianta, DFS, Heinemann and so forth offer great products in beautiful stores. It can be a pleasure to spend time in those stores. All of these locations offer great value, exclusive products and more. Whatever your budget, there is likely to be something that is right for you.
For those that want premium luxury branded stores, you will find value there too.

Another final thought. Do you want airport shops to look like the warehouse section of Ikea or do you want somewhere inviting and engaging to wait for you next flight? I know what I would prefer.

As ever, thank you for reading and sharing.

Kevin