Are airports now the sweet spot for luxury retail?
Last year, Estée Lauder Co. for the first time earned more revenue at airports globally than at U.S. department stores.
“Very few channels have almost guaranteed traffic,” Olivier Bottrie, who heads Lauder’s global travel-retail business, told The Wall Street Journal. “When a department store goes away, it’s not a major catastrophe. But if a major airport went away, it would be a major catastrophe.”
The WSJ’s article explored how luxury spending is expanding at airports in large part due to a spike in travelers from emerging markets such as China, India, Russia and Brazil that are seeing rising middle classes.
According to a report from The Data Circle, global duty-free sales at airports rose 9.3 in 2018 to $76 billion in another year of above-trend growth. The gains were driven by increased passenger volume, up 6.5 percent year-over-year, and rising spend per person. Asia Pacific, led by China, spearheaded regional growth, with sales rising 15 percent, ahead of the Middle East, 10 percent; Europe, nine percent; the Americas, six percent; and Africa, three percent.
Also helping spending inside terminals overall are longer wait times, partly due to tightened security following the 9/11 attacks. According to Bacardi, the average passenger spends 72 minutes waiting between security and boarding. Passengers have more time to browse over more thoughtful or indulgent purchases. Travelers on holiday are also often in the mood to splurge.
Also supporting growth is an increasing number of low cost airlines driving more tourist traffic and re-configured terminals that support shopping.
DFS, the largest operator of duty-free shops, saw strong revenue growth in 2018, according to the annual report of its parent, LVMH. The gains were buoyed by high impact marketing campaigns, in-store events, the introduction of new digital communication tools, and the expansion of products “to meet the expectations of younger, more exacting travelers while showcasing the uniqueness of each destination.”
- Forget the Mall, Shoppers Are Buying Gucci at Airports – The Wall Street Journal
- Duty free market hits US$76 billion in 2018: Travel Retail State of the Industry report from The Data Circle out next week – Moodle Davitt Report
- Airport retail has a long runway — for the right brands – Retail Dive
- LVMH 2018 Annual Report – LVMH
DISCUSSION QUESTIONS: Why have airports seemingly become more conducive to luxury spending? Where do you see the strongest growth opportunities for retailers or brands at airport terminals?