London’s Heathrow Airport is one of the busiest transport hubs in the world, getting nearly 80 million people to global destinations in 2019. That’s a lot of shoppers, many of whom have spare time after getting through security, which they might spend browsing retail offerings.

Or at least, it was a lot of people. Recent data indicate that in July 2020, Heathrow Airport hosted about one-tenth the number of passengers it would expect in a regular month. The COVID-19 pandemic and its toll on travel, both domestic and international, has vastly reduced the number of consumers purchasing flights, but also the numbers of those purchasing the retail products and services available in terminals.

Beyond the dramatic decreases in the number of shoppers, pandemic-related regulations on retail operations have limited sales opportunities too. Stores must enforce social distancing and provide hand sanitizer stations, which are relatively difficult requirements to implement in the warren-like designs of many duty-free stores. These shops have sought to help consumers get “lost” in their stores, so that they could stumble upon some perfume, liquor, or treat that would surprise and delight them. But finding appropriate places to install sanitizer stations for consumers who are lost in the aisles is difficult to do.

Even more difficult is the decision whether to open at all. Many of the shops, as nonessential businesses, were forced to close in the early days of the pandemic. Reopening their airport storefronts does not necessarily make sense, from an operational standpoint, because they would incur the costs of operating the store (e.g., staffing, lighting, inventory) without much promise of earning revenues from the comparatively few travelers in the airport. Thus at Heathrow, only about 60 of the 340 firms that have stores inside the terminals (which includes a lot of food retailers) have reopened.

Those travelers are more suspicious too, demanding remote ordering options for food and snacks. They might feel the need for a cup of coffee or a sandwich as they travel, but their immediate demand for clothing, souvenirs, and jewelry is less pressing. Thus, even if consumers are in the airport, and stores are open, there is still no guarantee of sales in the modern coronavirus setting.

These developments are difficult for the retailers in terminals, which in turn have powerful impacts on the airports themselves. Most airport operators choose not to charge rents (or at least, not substantial ones) and instead enter into agreements with the retailers they house, to take a percentage of their sales. At Heathrow, that source of income accounted for about one-quarter of its total revenues prior to the pandemic, and the amounts had been increasing steadily for over a decade. The increases came mainly from more travelers. That is, people’s average spending in airports did not increase and instead remained steady at about $18 per passenger. But there were more of them streaming through the terminals in recent years.

Not anymore, of course. Still, the airport notes that stores continue to open slowly, and there are some promising signs—like the recent, notable purchase of a nearly $90,000 diamond engagement ring from Tiffany & Co. in the airport. Just a few more sales like that, and the airport might be back in business on all fronts.

Discussion Questions:

1. How should retailers with store locations in airports decide when to reopen?
2. What kind of shopping do most consumers engage in while traveling? How have those behaviors changed in the COVID-19 era?

Source: Benjamin Katz, “Airport Shopping Has Been on a Tear for Years. Now What?” The Wall Street Journal, August 29, 2020