If Your Business Is Having a Bad Year, Remember Airport Fashion Retailers Exist
When coming to Brazil to visit my family, I went to the terminal where the largest flights of the Paris-Orly Airport leave for the first time since this Covid-19 mess started. Needless to say that I have never seen it so empty before. To complement the few people walking around the quiet airport, all stores, with the exception of some touristy shops, were close. Chanel, Gucci, Saint Laurent, and Celine were just a few stores that I saw completely shut down due to lack of clientele. Of course after seeing that I had to check how tragic airport retail data is this year and I decided to share what I found here.
The Importance of Airport Retail
Airport retail moves around US$79 billion in a normal year and airports and fashion brands rely on this stream of revenue to generate profit. In 2019, the world’s top 10 Airports registered US$12.6 billion in sales. For the fashion industry, sales made at airports are extremely important, especially when it comes to cosmetics and perfumes. However, bags and scarves also get a share of sales from this sector.
Since the first duty-free shop opened in 1947 at Shannon Airport in Ireland, this business sector became a key tool not only to turn profits from but for brands to market themselves to different customers. Some brands even made airport stores their strategy to access a new range of customers, such as Brazilian jewellery label H. Stern. Before the pandemic, global airport sales were forecasted to grow 6% in 2020…but we all know that’s not how the story goes.
Airport Retail During Corona Times
In 2020, the Covid-19 pandemic changed our never as before connected world with travel restrictions to contain the virus contagion. The result? 2020 is set to close with a drop from 60% to 80% in travelling. If people are not travelling, they are not going to airports and if they are not going to airports, they are not shopping at airports’ stores. Now the numbers are rough. On average, airport shops have lost between 75% and 85% of their turnover, according to David Dayan, CEO of Beauté Luxe, which is the global leader of perfume and cosmetics distribution in airports and border shops. Dayan also stated airport retail will probably take five to ten years to go back to the revenues of 2019.
According to a scenario modelling by McKinsey and Oxford Economics, the pandemic lifecycle of the travel industry will consist of four stages: a crisis period, a recovery from the pandemic, a recovery from the economic downturn, and eventually a new normal.
The problem is that many retailers can’t afford to wait for all that to happen. Waiting can mean losing jobs and closing stores. Therefore, many retailers are creating new solutions to solve this problem.
Solving the Issue
Initially, the recovery will be around domestic or nearby -country travel. In China, the numbers of domestic flights already went back to the pre-pandemic level, which is a good sign. However, it is important to keep in mind that part of these travellers comes from the suppressed demand for international travelling that is not currently possible. This scenario means that the airport retail that is usually concentrated in large airports at regional hubs or shopping capitals may spread to medium airports at regions that were less attractive for this sector before the pandemic. This shift can be already seen in China, with brands already investing in opening stores at regional hubs airports. Another result of this scenario in China was the Hong Kong-based DFS Group 22% stake acquisition in Shenzhen Duty Free Ecommerce Co.
Some brands are also exploring the click&collect strategy, in which clients buy products online and collect them once at the airport, avoiding taxes. This doesn’t solve the problem, but it can drive a few sales, and let’s be honest, any sales are welcomed at this point. However, most stores at airports are not even open to offer this service, once paying staff and bills to stay open is not worth it at this moment. However, this path can have some potential. In India, Google partnered with startup Airbuy’s Spot platform to create a micro-app in which customers will be able to order food and beverage in six different airports in the country. Even though the companies are starting with food, they have plans to expand soon to other retail sectors, as Jasjit Makol, one of Airbuy’s founders, explained:
“The Google-Airbuy will, in the next 12 months, also get into other partnerships to enable online shopping retail outlets in domestic terminals and duty-free outlets in international terminals.”
Even though this strategy is not the solution to all airport retail’s problems, it can be a way to recover from this tragic year. Besides that, I believe retailers and airports will have to patient and cheer for vaccination to be done fast around the world. Travelling may be one of the last industries to recover from 2020 and the fashion industry depends on trips to cash in. Having the virus gone will only be the first phase of recovery. To travel, people need financial stability, which the economic crisis ahead of us may not be able to provide. I guess I have to make sure I buy the Havaianas flip flops for my friends in Paris before I get to the airport because there is a big chance that stores won’t be open there.
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