Can retailers find riches at sea?
Smack dab at the heart of the experiential trend, it appears to be “anchors aweigh” for cruise retailing.
“While land-based retail is suffering from internet competition, cruise retail is thriving,” said Beth Neumann, president and CEO, Starboard Cruise Services in a press release outlining a number of upgrades for 2018.
Starboard, owned by LVMH Moët Hennessy Louis Vuitton, is the leading on-board duty free and travel retail operator. By 2020, Starboard expects to operate over 360,000 square feet of cruise ship retail space, with more than 750 brands across more than 90 ships.
LVMH also owns DFS, the operator of duty-free concession airport shops, and Starboard seems to work similarly.
Starboard claims to be the first to bring Bulgari, Cartier, Tiffany, Dior, Omega, Ferragamo, Kate Spade, Michael Kors, Kiehl’s and Shiseido to the retail cruise experience. Popular-priced brands, such as Nike, Victoria’s Secret, Swarovski, Benefit, Chico’s, Vineyard Vines and Guess, are also part of Starboard’s offerings.
In sync with the ships’ entertainment options, many of Starboard’s shops offer interactive experiences: fashion trunk shows presented by designers; seminars with beauty experts; make-your-own workshops for jewelry, handbags and flip flops; and in-shop social events. Ms. Neumann said Starboard’s success is about “becoming an essential part of the daily cruise journey in memorable and engaging ways.”
Like duty-free airport shops, cruise retailing benefits from captive audiences, as well as the tax advantages of being in international waters.
In an interview with travelpulse.com, however, Miguel Maal, a partner at strategy consulting firm OC&C, said cruise travelers can be turned off by inflated pricing related to that captivity.
With a solid understanding of the demographics and the “leisure ‘mission’ their travelers are on,” on-board retailers benefit from crafting aspirational experiences that work with the cruise adventure, Mr. Maal added. In particular, purchases tied to the journey can create “a meaningful, significant moment they can remember.”
Themed tours also present opportunities for targeted retailing. In a partnership with ABC’s cooking-themed talk show, “The Chew,” Disney Cruise Line is introducing a series of culinary excursions, including a cooking lesson in Tuscany, a culinary boot camp on Prince Edward Island and time at the Klipfish Academy in Norway.
Discussion Questions
DISCUSSION QUESTIONS: Is cruise retailing an untapped opportunity for many retail brands with its experiential appeal? Does you see advantages over what airport or resort retailing offers travelers?
Poll
BrainTrust
Dave Bruno
Director, Retail Market Insights, Aptos
Jennifer McDermott
Consumer Advocate, finder.com
When retail is put into a lifestyle context it becomes more relevant and adds value to the experience. Merchandising and product mix should be contextual so cruise ships, airports and resort traveling do offer strong branding potential and an untapped area of revenues.
Cruise retailing – when done right as Starboard has clearly done – is a living, breathing example of how good brick-and-mortar retail can be when done right. Localized (in this case hyper-localized) assortments paired with rich, relevant experiences lead to great results. As Paul Revere might have said, this is a formula for success by land and by sea!
Only if the product assortment fits the lifestyles of the particular cruise line’s target market. Being captive on a cruise ship is one thing. Being focused is clearly an altogether different phenomenon. If done properly, there are riches in niches.
Let’s see … Captive audience, duty-free purchases — it can’t hurt!
What better experiential playground for retailers and brands to capitalize on than the cruise industry? With its combination of a captivate, excited and engaged customer base, the luxury space is a prime opportunity for Starboard and LVMH. Compared to airports and hotels, cruise bound consumers are always looking for an emotional and experiential connection to their cruise journeys that extend beyond the products.
Additionally, the Starboard and LVMH team has a virtual monopoly over the non-Disney cruise lines. So there is a prime opportunity for the combined Starboard/LVMH team to drive their experiential focused storefronts, push the nostalgia merchandising and add a luxury flair to the mix, as the cruise customer is ready to add to their travel experience.
I was surprised a couple of years back when one of the major cruise lines subscribed to our online sales training for the stores on board their ships. It gave me a glimpse into a world I didn’t really understand. Three years later I can attest to the opportunity for retailers in cruise retailing. Non-stop customers with money in their pockets and no where else to spend.
I can’t speak definitively for Starboard, but most cruise experiences I’m aware of are all inclusive packages. Having paid upfront for food, beverage and experiences doesn’t mean that these travelers show up without money to burn. There is something about vacations that makes us want to spend, and these retailers are perfectly placed to benefit from this. As long as the clientele fits the retailers, it’ll be a success.
Travel and hospitality are ripe with retail opportunity, for sure. I am seeing cruise, airline, hotel and other industries jump on this bandwagon with ferocious enthusiasm to capture the huge, relatively untapped global market here.
Hotel is an interesting one for sure. Obviously the Vegas hotels with their giant footprints and blurred lines between entertainment and shopping are the archetype there, but not all locations will be able to imitate at that scale. Ralph, I’m interested to know if you see opportunity for this with airlines themselves to benefit as opposed to just the airports?
Thanks for asking, Evan. I absolutely see airlines beginning to capture retailing opportunities, however, they are truly just getting started. Onboard retailing can take the form of in-flight product selling, services upgrading and business partner co-selling, with more to come, I’m certain. I am curious which airline will make this a strategic objective and define proactive strategies to build this business.
This opportunity is not the result of “experiential retail.” There is opportunity here because a cruise ship offers a captive audience who want a resort-like experience. So let’s take care.
Retailers whose products fit well with that experience may be smart to take advantage of the opportunity — but a serious cost analysis should be completed first. Shipboard retailing doesn’t allow a broad assortment of product nor will it work for most products. Success will depend on careful selection of products that work in this environment.
Which all returns us to … well … product. To build retail strength, experience must be all about product, moving product, selling product and driving revenue and profit. The cruise line’s job is to provide the experience.
Agree with your sentiments that basically describe a well curated assortment that is a good fit with the particular customers who are on board for that specific cruise. (Different cruises, different customers, different assortments in fact for Starboard.) Isn’t the curated assortment that fits that “resort-like experience” part of experiential retail though?…
There’s a problem with the term “experiential retail” in that it quite often implies things like “the store is just media” meaning that selling is unimportant. In terms of how I consider experiential retail, you are right (although I’d add emphasis on selling).
But the concept is being used by select industry luminaries who suggest the cruise is the experience and sales are unimportant.
I think this is certainly untapped and believe smart retailers are looking to find out where consumers are shopping and experiencing their brands, including commuter hubs, airports and hotels. The advantages are similar across these categories — a captive audience/guaranteed foot traffic.
Definitely a strong opportunity with a number of positive factors (cruise customer demographics, merchandise mix strategy, captive clientele) for LVMH to further gain marketshare. Will be interesting to watch.
I’ll confess I had never given this topic much thought (I doubt many RW readers have), but my five-minute take is, in some ways this might be a perfect environment. Travelers are in a festive mood, and have plenty of free-time to explore a ship and mull buying decisions if they spot something they like. OTOH, like me, they probably haven’t given much thought to shipboard shopping, and if they have they’re likely conditioned to the usual souvenirs and overpriced necessities. The numbers presented — 360Kgsf/90 ships>4000gsf/ship — points up the difficulty in maintaining a worthwhile level of inventories (not to mention the difficulties of OOS on the high seas!) So I’ll defer judgement until Starboard can provide some feedback.
As shoppers find experiences more important, cruise retailers have a unique opportunity to help them make memories. A hat or handbag purchased on vacation brings back memories of sun-soaked days with family and friends. If retailers get pricing and assortment correct, they can fully take advantage of this opportunity.
This is a great extension of the retailer’s brand and merchandise. At sea, there is a captive group of customers. Many will be attracted to the brands they know and trust. Done well, this is an excellent way to extend the reach to a group of customers who are in a different mindset (a vacation mindset) from the traditional reasons they shop.
Shiver me timbers, it’s retail upon the high seas! Where travelers are held captive amidst ye luxurious treasure and can’t resist a bit of plundering! 🙂 Seriously, though, cruise ships are a worthy experiment. It’s a data analytics nerd’s dream scenario — all transactions and traffic happen within a self-contained ecosystemm where you can ask questions like: Are customers more likely to make a retail purchase after buying a rummy cocktail? Are conversion rates higher at certain times of day? How does that data impact daytime programming…argggh, now I’m starting to sound like a data pirate meself! …I’ll show myself out.