In my previous posts about repositioning Travel Retail, I have talked about the pressure on retailers to drive incremental growth despite rising concession fee’s, fluctuating currency rates and increased competition from online. All of these pressures have a negative effect. I am sure you will all agree it is a fascinating market but also a tough one. Maybe, the time has come to re-think the model and subsequently profit generation.
I now want to take things a stage further and take a new fresh look at retailer & brand revenue.
The focus will be on Airport Shopping but the principles can be applied to almost any channel within Travel Retail.
Airport Retailers do not pay a standard rental amount for their store space within an airport. They pay a concession fee based on a percentage of sales. These charges are usually agreed at a subcategory level and will vary. There are also other variables included where the passenger is travelling to (schengen and non-schengen).
WE MUST FACE FACTS
Before we move on, we do need to face a few facts:
- Not everyone will buy from us
- Not everyone will want what we offer
- Not everyone will be able to afford some of our offer
- Not everyone will want to shop
- Converting an additional 5 to 10% of passengers is HUGE (seriously!)
- We need to move from incremental steps to quantum leaps
- Most growth is from rising passenger numbers + inflation + currency fluctuations
In recent years, we have read about “Doubling the category in 5 years” however, large steps in category growth will require some different thinking. There is a quote that springs to mind – “If you always do what you have always done, you will always get what you always got” (it seems to be attributed to many people so I won’t name them all!). The point is true though. We must evolve and make a step change to see a different outcome.
In summary, doing more of the same will not lead to a step change in results.
REVENUE OPPORTUNITIES FOR AIRPORT RETAILING
There are different perspectives to be had. Personally, I have worked in Domestic retail, Travel Retail and I am also able to take a third position – outside looking in. What is very clear to me is the potentially HUGE untapped profit streams that are available for retailers and brands. If we are to radically change our sales trajectory (or rather our profitability trajectory), we need to think differently, and do things differently. We need to deliver the unexpected.
The essence of this new model is to break free of the confines that we as an industry find ourselves in. There is a whole new territory to explore, one that could change the way our retailers and brands operate in the future (and I am not talking digital).
We are currently preparing an exciting way of sharing some of the ideas we have for profit generation. Subscribe or follow us on Linkedin
IF I WERE TO OPEN AN AIRPORT RETAIL STORE
The way we do retail in Travel Retail needs to be re-invented. If I were to create a travel retailer now, I would take a different approach. Imagine a retailer that brands would fight to get into, airports would invite to tender and shoppers would love. Within 12 months it would become and industry beacon. Profitability would be transformed because it would harness the very thing that would drive positive shopping behaviours.
- The store would have a series of low cost, world firsts
- The store would create a playground for brands.
- Would deliver incremental profit streams
- Inherited stores could be adapted at a relatively low cost
- Store investment would be optimised
The store(s) would change the way our channel operates forever. Maybe then, we would give Amazon a run for its money.
We will be sharing the ideas very soon.
In my e-brochure last year for Cannes – Travel Retail 2020 (contact me for a copy), one of the things I talked about was creating Dynamic Retail Environments.DRE’s are about creating space in store to test new categories. I am pleased to say that I have recently visited an airport that seems to be doing just that. Time will tell to see if they open a new store with that product category in.
We also need to radically re-think fixtures. They need to change dramatically to derive growth and generate a better return on investment…. and I don’t mean putting screens in them! We need to get more advanced than that. We need to change our approach radically to ensure that we maximise every opportunity. The fixtures of the airport store of the future will be different.
THE BARRIER TO SUCCESS
The biggest barriers to our success is of course ourselves. The limitations that we place on ourselves, the rulesets that we live by create a barrier to success. But who made those rules? How did they come about? Why do we restrict ourselves? I see limitations in Travel Retail that would never be present in Domestic retail and there is no clear reason for them to be there.
A radical transformation requires innovators to drive it through. We cannot sit on our hands and do things because “we have always done it this way”. We need to be bold, we need to be brave and we need to act fast. Small changes to existing stores will be all that is needed to create the first step to the brave new retail world….. and I have a blueprint.
The key question now is who will be first to act – the airports, the retailers or the brands?
Let’s do it. Let’s go for it. Let’s begin a new era for Travel Retail.