What’s next for travel retail?
The words ‘travel’, ‘retail’ and ‘pandemic’ do not evoke positive connotations. Lockdown restrictions, quarantine periods, and general fear of travel at this time have created a major challenge for travel retail. Spending post-Covid could go to one extreme or the other. Some hypothesize that we will see ‘revenge purchases’ as consumers celebrate the end of lockdown whilst others worry that consumer uncertainty and job losses over the last year will keep spending low.
In China, domestic tourism has remained strong, but the mechanisms behind this growth are specific to Chinese tax-free allowances, primarily in the Hainan region, and cannot be conflated as a signal of growth to come for the rest of the world. In this article, we discuss the customer experience specific to travel retail, and how we think it will evolve in response to the challenges of the pandemic.
Unique customer experience in travel retail
Often, airport activities are viewed as purely transitory. Most people pass through on the way to their final destination and do not stick around to enjoy the airport itself. Designing airports as true retail outlets can make them into veritable attractions within the traveler experience. Something to look forward to rather than dread.
Travel retail design has to consider the traveler‘s mindset and objectives. Currently, most airport retail is positioned as a complementary activity at best, and an inconvenience at worst. To keep up with the convenience economy and the plethora of competitively priced eCommerce merchants popping up, travel retail must provide a new experience that draws in customers.
To develop a travel-specific customer experience, brands need to plan this specific customer journey in the wider context of omnichannel shopping. Focusing on a traveler’s need for miniature toiletries is not enough in 2021. Travelers can buy everything they need in advance and are no longer restricted by whatever is available at the last minute before take-off. Companies need to develop shopper experience and product offering that is unique to travel, and that consumers will be drawn to as part of the broader travel experience.
Brands must immerse their travel retail spaces and products in their brand identity. Often, brand stores in airports are operated by external companies, but they risk losing control of the customer and brand experience. Retailers need to add sensorial triggers and add-on services to their existing offline offering to set their travel retail experience apart.
Leading beauty companies are designing product sets aimed at travelers, such as anti-fatigue and in-flight pampering. Although these items are available to the average consumer, combinations in travel retail-specific packaging create a simple offering that feels fresh and contextualized for travelers on the go. Estee Lauder Companies say that nearly 60% of new beauty consumers make their first purchase in an airport, so these bundles can be an excellent way for brands to memorably win new customers.
eCommerce travel retail
The same challenges facing brick-and-mortar stores in competition with eCommerce retailers also apply to travel retail. Before the pandemic, travel retail was one of the fastest–growing offline retail channels. In 2018, Allied Market Research projected the market would almost double between 2018 and 2025. This has been thrown off course by the halting of international travel, and the rate of recovery remains uncertain as government restrictions vary massively between countries.
In response to the growth of eCommerce channels, some travel retailers have expanded their offering and ordering processes online. Businesses such as Mydutyfree already acted as an online channel for pre-ordering duty-free goods before arrival at the airport for ‘Click & Collect’. econsultancy reports that the future of retail will entail a pre-planned traveler mindset rather than the shopper spontaneity that was previously relied upon. Customers will either want to see what is available before they set off for their travels, or they will buy them and arrange to collect them later.
Some retailers offer in-flight purchases of duty-free items for the customer to then collect upon their arrival at their destination airport. Others allow travelers to order items in-flight or at the airport and to have them delivered to their homes. This frictionless process allows customers to take advantage of duty-free prices whilst avoiding the hassle of carrying their purchases during their travels or fitting them into their limited luggage space.
Sunrise Duty Free has adopted the popular feature livestreaming to their strategy. According to Moodie Davitt Report, the app’s livestream attracts around 300,000 viewers for each session. Sunrise allows customers to order items directly via their WeChat accounts after seeing them on their livestreams.
Increased hygiene concerns will likely fuel the continued integration of digital touchpoints along the traveler‘s path to purchase. Not only do they save time and reduce the number of shoppers browsing in-person, but they also allow travelers to pick up their pre-packed purchases at the gate or storefront, creating a more contactless experience.
Regions of growth
Cosmetics Design Asia states that leading cosmetics brands are banking on APAC travel retail to drive growth. One leading beauty group said that 2021 Q1 earnings showed APAC accounting for 90% of their travel retail business.
In July 2020, the Chinese government more than tripled annual offshore duty-free quotas for tourists to Hainan. This led to a 227.5% year-over-year surge in spending on the island. According to Daxue Consulting, duty-free shopping is still a big tourist driver as 65 million tourists visited the island of Hainan in 2020. Here, consumers can buy a range of tax-free goods, including cosmetics and electronics.
Luxury brands are the second-most visited outlets in airports, following F&B. The Moodie Davitt Report pointed to LVMH as a strong example of a luxury group participating in the Hainan Expo from 7th to 10th May. LVMH also shared their intentions on WeChat, announcing that they hope to continue leading China’s luxury industry. The event will be attended and exhibited by China’s top travel retailers and is labeled ‘Hainan, a Pioneer of Opening-up in China’. A bold statement from China that demonstrates their ambition to make Hainan an International Tourism and Consumption Center.
The expansion of shopping in Hainan has happened in tandem with Chinese consumers moving from buying luxury goods 60% abroad (Business of Fashion), to almost 100% at home. eCommerce retailers and domestic tourist destinations have taken this opportunity to grow further. However, Bain reported a 35% drop in Chinese luxury spending due to travel restrictions, despite domestic product availability.
It is still not known how habits will change when travel resumes. The rate of change of travel restrictions across different regions also diminishes consumer confidence in traveling at a time when the rules can change between when you take off and when you land. Brands need to be prepared to meet demand, whether it be from domestic or international travel. As demonstrated in China, we do not necessarily need to wait for borders to open before engaging with consumers who are looking to explore their home country and treat themselves to something new.
For more information on how Tag can boost your travel retail offering across physical and digital channels, schedule a call.