By Ian Hill
Airport Business’ Ian Hill attended the Airline Retail Conference earlier this month, where global leaders in inflight commercial discussed the challenges to growth – and the wealth of opportunity – in the future of the thriving airline retail industry.
The Airline Retail Conference, the leading industry event centred on inflight sales, took place at Olympia London earlier this month, attracting over 300 delegates with 61 exhibitors showcasing their wares to airline travel retail buyers and agents. The event provided a forum for new and established brands looking to break into travel retail, and impress inflight buyers with their novelties.
Insightful conference sessions were split into three streams – Inflight, Pre/Post-flight and a new subject, The Digital Traveller, which explored the impact and implications of the ‘always connected traveller’ via smart phones, tablets and other internet devices.
In his opening Keynote Address, Keith Spinks, Secretary General of the European Travel Retail Confederation (ETRC), warned of the likely curbs facing inflight sales as a result of restrictions on inbound allowances, the move to standardise tobacco packaging dominated by health warnings, and the impossibility of labelling in up to 23 languages as has been proposed by the EU. “This will lead to fewer products, less choice for the consumer and less revenues for airports,“ he said. “It is crucial that the duty free consumer is provided with appropriate information in place of labelling. The problem is that we [the duty free industry] do not fall under one policy area in terms of the EU Commission.” Spinks called on the audience to write to their MPs to speak up for the protection of duty free sales distinct from domestic retail. “How can we secure an action plan from the Commission that will recognise the uniqueness of our business?” he asked.
James Halstead, Partner, Aviation Strategy, emphasised in his overview of the current aviation retail industry how Gulf carriers such as Etihad and Emirates, ‘The World’s Favourite Airline’, have gone into regional airports and taken traffic away from the European legacy carriers, and now are targeting the USA. Airlines on average return a very low net margin of 2% and a maximum operating margin of 6%, he explained. Arguably the largest increase in airlines profits is in the USA, where consolidation has led to three airlines owning 75% of the business.
As if to underline the massive airport and travel retail expansion in the Middle East, George Horan, President of Dubai Duty Free (DDF), announced that Dubai Duty Free’s fourth concourse, Concourse D, will open in September. This will add a further 7,000sqm to the current 26,000sqm retail space, and will be home to the 100 airlines currently operating in Terminal One Concourse C. “We are pleased with the layout, which has huge vendor involvement,” he said. The theme of Horan’s presentation was the value of forming, retaining and maximising commercial relationships between retail operations on the ground and in the air. “When Concourse A opened early in 2014 we found people were heading straight to the elaborate Emirates first-class lounge and not shopping,” he stated. “Discussions with the airline followed, and we ended up being given some back-wall space to provide a window of what happens downstairs. It was a win-win situation for both of us. We want to forge a partnership with Emirates Airlines and are already providing a concierge service to business class passengers in Concourse A with a range of 4,000 items on offer.” In terms of sharing data with airlines now and in the future, he commented: “The more we know the better we can manage the operation and plan for the future.”
The second break-out Workshop Two on Day One featured a short presentation from WH Smith International Director Louis de Bourgoing, who discussed the retailer’s relationship with airlines. “We are testing something very exciting which enables consumers to download newspapers,” he said. “We have 100 newspapers from 20 countries, some of which are difficult to import. Passengers can either download them instore or purchase a voucher if they are in a hurry, with a code to download. This can be done in airports or even inflight as some carriers have WiFi.” WH Smith’s new toy shop format the Zoodle store recently opened its latest outlet in Departures at Hyderabad Rajiv Ghandi International Airport. The 700sq ft shop, is dedicated to children, and offers a range of toys, activity products, magazines, stationery collections, gifts and gadgets. “The new Zoodle store at Hyderabad is number two in terms of sales compared to the other WH Smith outlets at the location, so is a real success,” de Bourgoing said. “The airport is very happy.” WH Smith operates over 700 stores in travel locations, including more than 160 units in around 50 airports.
Niklas Julin, Marketing Director, Inflight Service Europe, declared in his challenging presentation ‘Who Cares about Airline Retail?’ that pre-order is the future, and will overcome most of the disadvantages associated with onboard shopping. “Research we conducted amongst passengers in the UK and Spain revealed that only 5% considered inflight duty free shopping important to them, he established, “yet it was important for the overall travel experience. However, eight out of ten people said they would spend using pre-order if given the opportunity. The possibility to do this early in the ticket booking process is key.” Julin acknowledged that suppliers to airlines must invest in large warehouse inventory, and that space and weight considerations (purchases delivered to aircraft seats and not on arrival at destination airports) have deterred many airlines from going down this route to date. The point was also made from the audience that pre-order only works in the Nordics because of savings in excise duties, and that perceived duty free savings are not available elsewhere in Europe. “We have just started up with Jet Air in Belgium and discussions with BA, Air France-KLM and other airlines are ongoing,” Julin continued. “We need to get a strategic commitment through the whole organisation – airline, retailer and caterer, and it will require a dedicated IT resource to set up the system. Most importantly the crew must buy into the pre-order process.”
The Airline Retail Awards dinner and ceremony took place at the Kensington Close Hotel on the evening of Day One. The first prize went to KLM Royal Dutch Airlines, which triumphed in The Best Airline for Inflight Retail category. British Airways scooped the Best Airline for Food and Beverage award, while The Best Inflight Concessionaire prize went to Inflight Service Europe. Scorpio Worldwide collected the award for Best Inflight Retail Agent or Distributor, and KÖLD Frozen Cocktails claimed the Best New Inflight Product prize. The Best Inflight Product award went to Daniel Wellington, with Pots & Co. and Chai Latte triumphing in the Best Inflight Product – Food and Best Inflight Product – Beverage categories respectively. Tony Detter, Managing Director of Inflight Sales Group, won the Airline Retail Personality of the Year award.
