Modern travel often means getting to the airport with more than enough time, just to be safe and avoid the chances of missing a flight due to long security check lines. As a result, airports are home, at least temporarily, to millions of potential consumers with extra time on their hands while waiting for their flight to board—many of whom are already in a vacation mode and ready to spend their money.
In turn, retail operations in airports are becoming an increasingly prevalent and important channel for many brands, especially luxury product providers. Consider Estée Lauder, long a staple of department stores, which last year earned more revenue from airport sales than from all its department store counters combined. Overall, global sales in duty-free and travel-hosted retail outlets have grown to $76 billion.
The rise in sales results from several contributing factors, all of which support many brands’ expanded presence in international airports in particular. As noted, travelers find themselves with an average of about 72 minutes between the time they get through security and the time their flight boards. Some of them might work or read or grab a bite, but many others are looking for entertaining options, including shopping.
If those travelers are coming from international destinations, they also appreciate gaining access to products that might not be available in their home countries. Accordingly, the growing number of middle-class consumers from emerging nations like China and Brazil, whose travel habits have been growing with their economies, expressly plan ahead to shop in the duty-free shops in international terminals, snapping up high-end products that they cannot find at home.
In turn, retailers are emphasizing expensive, luxury, conspicuous products. Gucci makes $38 lipsticks available. Bacardi introduced a limited edition version of its Aultmore Scotch brand; three versions, priced at $400 each, could only be found in airports. Its sales data showed that most people sought to buy all three, enabling them to come home with $1200 worth of Scotch that no one else was likely to have.
Discussion Question:
- Why are airports a good location for retailers?
- Which types of retailers do best and worst at airport locations? Explain your answer.
Source: Jaewon Kang and Sharon Terlep, The Wall Street Journal, June 17, 2019