Importance of Travel Retail in the Aviation Industry

The travel retail industry sells goods to international travellers, thereby contributing immensely to the growth of airports by generating huge revenues.

FREMONT, CA: Travel retail generates significant revenues for the aviation, travel, tourism, and maritime industries. It is the largest contributor to non-aeronautical income at airports across the world. Since shopping is an important part of the travel experience for many travellers, providing duty-free retail goods is both a service and a great revenue generator. According to industry projections, over one billion international passengers pass through airports every year, which is expected to grow by 5 per cent per year.

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A Key Element of Airport Growth

As stated earlier, travel retail is a significant revenue generator and thus the cornerstone of airport growth. Modern airport terminal design recognises the crucial economic role that travels retail plays and ensures that new airports are developed with spacious and dynamic retail spaces. The significant product categories in global travel retail are fragrances and cosmetics, wines and spirits, and accessories.

The growth of travel retail is driven by many factors, such as increasing travellers, the tendency to shop while travelling, combining luxury with everyday products, and many more. The number of people travelling is elevating dramatically and is expected to escalate with emerging economic improvements. Travellers have more time to browse in airports designed as inviting shopping areas. Moreover, travel retail uses data insights like knowledge of customers’ locations and destinations to cater to particular needs. Workers and product displays are structured based on arriving passenger culture and language to ensure that the right product is shown to targeted customers.

With current advancements, retailers have a plethora of opportunities to develop product visibility and increase customer loyalty, recruitment, and diversity. As travel retail is a market for luxury and high-end products, travellers purchase everyday and luxury items in the same location and at discounts. High-end luxury product retailers use travel sets and minis to present their services at a discount.

Business Opportunities in Travel Retail

Travel retail offers SMEs the chance to showcase their goods to international travellers at low advertising and marketing expenditures. Large manufacturers view the channel as a cost-effective route to market innovative products that need an international environment. Despite the channel being profitable, it has huge challenges. Air travel necessities like passport control, security, gate closure, etc., consume time from browsing and shopping. Space is another issue, where most duty-free shops, counters, and pop-ups operate in confined spaces, which presents challenges in balancing merchandising and a positive experience. Product restrictions and baggage allowances also affect the passenger’s propensity to shop.

However, huge advantages can be derived from the travel retail sector. Negotiating with airport management is the first step to operating a travel retail service. Concessions are then used to fund retail travel operations. Concession owners then negotiate with retailers on the proper margin based on anticipated sales volume. If retailers want to be in an airport and serve those travellers, they must bargain with the operator there. Operators seek out shops that will produce the most sales, resulting in higher income and profits.