For the past 16 years, Lewis Allen has been examining the power of brands and the role of travel retail in the passenger experience. Allen, a director at UK-based Portland Design, says the evolution of travel retail accelerated with the pandemic, with the digital expectations rising and demand for traditional, transaction-based specialty retail on the decline. However, brands will remain vitally important in the airport mix, converging retail and media into a seamless passenger experience. AXN’s Carol Ward spoke with Allen about the expansion of digital, the expected decline in on-airport transactions and the growth in media impressions, all combining for an altered passenger experience.
Ward: As we enter a new phase of the pandemic, how have travelers changed in 2022 compared to 2019?
Allen: A lot more customers have…become passionate about and feel positive about shopping in a new way. Some of that has been going away, but it’s undeniable that there are more people are intrigued by the digital option. For airports, digitalization is going to be key – digitalization across how I browse and select products, digitalization across how I buy. Then the logistics around how that purchase is fulfilled – brought to my hands, delivered to my door, brought to my gate, whatever it is. The question consumers will be asking is, if I can get this quality of fast retail or fast commerce outside in the domestic market, how do airports compare?
Every airport needs to make a decision about how they can be relevant to an increasing number of passengers who want to shop [digitally]. We’ve talked to airports about this and [there is confusion about which] digital technologies to invest in. For us, the sensible way to overcome those is to find the right partners who are already good at digital – who have very good online platforms for browsing, substantial catalogs, amazing logistics systems and amazing fulfillment. It’s very interesting to see what’s happening in terms of existing players already kind of tiptoeing around the edge of travel retail. There are well developed, quite mature platforms around, and airports need to look at bringing them in and having them onsite.
A lot of the pushback we get is, for example, when working with food and beverage partners on delivery to gates, [they say] that not enough people are using it, and maybe it’s too early. I think to us, it’s the [idea that] you need to be known as an airport that’s investing in these things. Sometimes it may seem like a slow uptake, but the overall impression is that this is a very smart, clever, digitally powered airport.
Ward: What does this mean for the brick and mortar in the airports? If everything is moving to a digital platform, there is lots of space that presumably is not going to carry product in the same way that it did in the past.
Allen: We talk about this idea of physical venues for retail essentially shifting towards what we’re calling a media platform. In the past, the value of that space was [measured by] a minimum rent and turnover based on the MAG model. The big question now is, what is the revenue metric of the future? What is the value of that space in the future? What is the true value of the passenger throughput?
I’ve got “X” million people per year, I’ve got space, and there is value in the way those people do or do not use that space to buy stuff. Obviously the transaction part for certain categories is struggling, especially in specialty retail. There’s a negativity towards specialty – it’s been declining. The airports exacerbate this problem because they have cookie-cutter concepts, they have things that you can find anywhere in the world. So what’s special about it? Just because it’s there doesn’t mean that you’re going to be excited about shopping there, particularly if you can go down your local mall or high street and see essentially the same store. I’d say that the death of specialty is as much to do with new consumer behaviors and mindsets as it is to do with the lack of excitement in the concepts that are in the airports. What we’re saying is that specialty is still good – people still love brands and they follow brands, they’re interested in what brands get up to in the world. Airports offer a perfect opportunity for those people to indulge their passion for those brands.
The physical venue starts to fulfill a different purpose in the mind of the passenger, and for the brand itself, as well. For the brand, they can recruit new customers or they can speak to existing customers who love their brand. Recruitment and retention are the key purposes of that space. The transaction will be there, but it may be less the purpose of that space. The new metric is not all about how much I’m selling in that space. We want to sell things, but we also we want to recruit new customers and we want to reward existing customers who are passionate about the brand.
So how do we do that? Concepts need to change to reflect that very different purpose. We used talk about passengers [as] consumers, and now we’re talking about an audience. How can the brand activate the interaction between the space, the staff in the space and the audience that’s going through the airport? Their job is to activate that experience, not with the sole goal of selling something today. It’s bigger than that.
Ward: The relationship between tenant and airport must change as well, right? If there isn’t a churn of sales, then a percentage rent isn’t going to work in the same way that it did in the past. Have you seen new models addressing that?
Allen: Globally speaking, what you’re going see is a decline in transaction sales year on year, we believe, until you get to a point where you’re forced to make a decision. So, we are saying that airports need to experiment now. Not every tenant has the same agreement. [Airports] can start with a more flexible approach, with certain areas or locations [with a different metric].
[There is] a new kind of MAG model whereby tenants pay a MAG per passenger. It’s the airport’s job to deliver the audience and it’s the concessionaire’s job to kind of convert those passengers into shoppers or diners. If I’ve got 50 million people going through my airport … I can say, what’s it worth to a brand to reach those people? To recruit them as customers using traditional media is very expensive and very random, and it doesn’t actually enable the most key thing in any brand recruitment exercise or brand retention exercise, which is a human interaction. Airports provide that unique opportunity to create a human-to-human experience.
If we’re confident about the audience – in the numbers and the quality of that audience – and if we’re confident about the ability of that audience to engage with interesting brands in great locations in great environments – well that’s huge. That’s valuable. We need to shift away from that sense of value coming from the need to sell. We’re definitely not saying you’re not selling anymore. Of course you are, but that’s one component in a more sophisticated mix.
Ward: What does that mean in terms of airport commercial activities?
Allen: We need to break down the barriers between the famous airport silos. There’s the media silo, there’s the commercial silo, there’s the operations silo. The [media] contract says you can advertise but you can’t sell. If you’re a retailer, you can sell but you can’t advertise. An ordinary traveler doesn’t see silos. It’s all just one experience. Particularly in this new revenue conversation, we need to understand that the journeys we are creating are seamless and boundaryless. It’s all an opportunity to create an impression to recruit a customer. Advertising is buying. Buying is advertising. I can be recruiting a customer and selling to customers all in the same place at the same time.
An example is Converse, the sneakers guys. In London they did a three-day activation called the Converse One Star Hotel. They measured what happened over those three days. They sold a certain amount of merchandise – about $50,000, so not bad for three days. They also measured new Instagram followers. They measured numbers of live streams from that venue and they measured the total number of media impressions. And they also measured dwell time within the actual hotel activation itself. The brand is saying, I’m doing something and I’m investing time and money to do it, but I’m not going to measure the value of it purely on how much stuff I sell. There were 226 media impressions, for example, and that is a very expensive buy in advertising world. That’s what we need to be looking at.