After the internet, the fastest growing channel at retail is the often-maligned airport terminal. The growth is being driven by a number of new airport terminals opening in major foreign markets as well as aggressive efforts by luxury brands to reach the jet set.
According to Generation DataBank, global travel retail revenues jumped 17.2 percent to $34 billion in 2007 from $29 billion in 2006, and are nearly double the levels reached in 2002. (In local currencies, airport retail revenues were ahead 11.8 percent last year.)
Sales are set to continue to grow strongly over the next five years, particularly in emerging markets, driven by the rapid increase in air travel and major investment in new airports and retail facilities. New terminals opening in London, Beijing and Paris have recently boosted airport retail's appeal, but India, the Middle East and Russia are also building terminals and expected to become much bigger markets in the future.
"The key factors stimulating this growth are increased affluence, growing tourism, rapidly expanding airline networks and new routes (especially those of low cost carriers)," said Nick Gladding, lead analyst at Verdict Research. "The increase in business travel as a result of globalization is providing a further boost to airport retailers."
By product category, luxury goods (defined all merchandise other than confectionery, fine food, alcohol, tobacco and perfumery products) now ranks as the biggest category at airport retailing, accounting for 35.5 percent of sales. That's up from only 19.5 percent global duty free sales, according to according to Generation Databank. An article in Footwear News stated that brands such Prada, Ferragamo and Chloé, are finding the retrofitted terminals to be highly conducive for selling high-end goods.
"Airport retail is growing very quickly, and the image is also changing," Marco Franchini, CEO of Bally, told Footwear News. "The market is shifting from a main category, like tobacco, alcohol and cosmetics, to a more brand-oriented shopping experience, with full boutiques and personalized shop-in-shop corners."
"Airports are a wonderful place for retail," concurred Neil Clifford, CEO of Kurt Geiger, which has six airport shops in the U.K. "You've got money, you're going on holiday and you have time to spare. You can buy an iPod or a Montblanc pen or a Hugo Boss shirt."
After luxury goods, the biggest categories were fragrances & cosmetics, representing 30 percent of airport retail revenues; wine & spirits, 17.2 percent; confectionary & fine goods, 8.8 percent; and tobacco goods, 8.2 percent.
Discussion Question: What do you think of the airport retailing opportunity for luxury brands? What has impressed you in how many terminals have been upgraded over the years? What other categories can be doing more to capitalize on the upgrades and expansion of airport terminals?