The waiting game

Brazilian novelist Paulo Coelho famously said “waiting is painful” and many would agree — especially air-travellers forced to spend inordinate amounts of time in airports after check-in. But while it is a problem, airports are now realising that it is also a spectacular economic opportunity as they have a captive clientèle with deep pockets.

As a result, new-age airports are now emulating the spiffy malls that the uber-rich shop in, and are transforming themselves into retail destinations, offering luxury goods and gourmet food.

Most travellers are hostages at airports, says marketing expert Jagdeep Kapoor, as travellers need to come to the airport at least two-three hours prior to a flight. “Whether they are killing time or scrambling to find last-minute souvenirs, most travellers tend to shop at airports,” says Kapoor, Chairman of Samsika Marketing, a strategic marketing firm.

For their part, airports have realised that it pays to up their game.

Eager to generate more revenue, most airports have transcended their function as transportation hubs and turned into prime commercial real estate.

“Traditionally, airports have banked on airline rents, parking charges and retail charges as sources of revenue. With passengers as captive audiences, most have realised the duty-free retail market potential,” says an Airports Authority of India (AAI) official who did not want to be identified.The democratisation of travelling and the budget airline boom are contributing to the opportunity domestically as well as globally, he says.

A report by Fung Global Retail and Technology shows that the global travel retail market was valued at $63.5 billion in 2014 and is estimated to reach $85 billion in 2020.

The report reveals that global duty free retailing market will register a CAGR of 6.7 per cent between 2015 and 2020. The Asia-Pacific region is expected to contribute the major chunk to the sales growth. India will be the fastest-growing market at 20.7 per cent between 2015 and 2020, adds the report.

Though the amount that Indian airports earn from retail is still small when compared to global rivals, the potential is huge. “If you compare it with international earnings, then it is much more challenging, for 50-75 per cent of the total revenue in mature airports like Singapore, Dubai, and London comes from non-aeronauticals like food and beverages and parking,” says a person involved in the airport retail business, requesting anonymity.

Though travel retail is still nascent in India, it continues to evolve, says a GVK spokesperson. GVK Airport Services operates the Mumbai and Bengaluru international airports.

“At Mumbai’s T2, we have created a landmark by having an extensive mix of retail and food and beverage (F&B) options spread across varied categories, which have been appreciated by passengers," he says.

Till date, more than 30 brands, such as Adidas, Lacoste, Fossil, Delsey, and Burger King, have made their foray into domestic travel retail through T2.

Corroborating this, Jagdeep Kapoor of Samsika Marketing maintains that as malls and shopping centres are transforming themselves into mixed-use spaces, retail opportunities at airports are growing by leaps and bounds. “Indian airports have started becoming world-class since domestic travellers are eager for a luxurious experience," he adds.

At the Bengaluru airport, the duty-free stores and F&B outlets appear to be the primary drivers of business, though recent trends indicate a growth in lifestyle and personal products like cosmetics, fragrance, fashion and accessories.

At Hyderabad’s Rajiv Gandhi International Airport, Indian multi-brand beauty retailer Parcos opened its store this August.

Other luxury brands like Hidesign, Accessorize, Da Milano, Mont Blanc, Hugo Boss and Swarovski have also popped up at terminals across Mumbai, Delhi, Hyderabad, Bengaluru, and Kolkata airports.

Harminder Sahni, Managing Director of Wazir Advisors, a consultant for corporates, points out that since footfalls have increased substantially at domestic airports, it has become imperative for brands to have a presence there. “At international airports, the audience comprises mainly of affluent and upper middle-class consumers. But domestic airports are not worse off,” says Sahni.

“Excepting early morning travellers, who are mostly business travellers, families tend to travel during the day and always reach the airport earlier. They are the ones who have the time as well as the inclination to spend,” he adds.

Retailers specialising in unique local items are also making their mark. For instance, at T2, a seated figure of Mahatma Gandhi greets travellers.

An initiative of the Aditya Birla Group, the “Eternal Gandhi” project is the brainchild of Kumar Mangalam Birla, Chairman of the Aditya Birla Group, and sells souvenirs that keep alive the spirit of Gandhism.

Another Indian brand to realise the potential of airport retail is the ₹600-crore Mahak Group, which is into FMCG and tobacco. The firm diversified recently into fashion accessories like scarves, stoles and shawls.

“Airports are self-sustained shopping enclaves, which drive in sales as they create a unique shopping experience,” said Samsika’s Kapoor, who helped the Mahak Group with their airport roll out.

Airport retail operators that BusinessLine spoke to insist the opportunity is huge. Moreover, with the government planning 50 new airports over the next three years, the market could attain critical mass. Though there is a new market emerging at these smaller towns, do these brands break even?

Wazir Advisors’ Sahni says, “Most brands do break even. Though the overall cost structure looks heavier, the sales velocity takes care of things. Airport stores are always on full price and with fewer options to compare, people tend to buy the products at full price. People also tend to purchase much faster as there is a flight to catch.”

But the key is the retail mix and there is a method to the madness.

“It is a science and is based on studying consumer behaviour at airports,” says Sahni. “Certain products won’t move beyond a certain point. With clothing brands, airports keep more casual wear than formal. And companies like Haldiram’s will keep smaller packs so that people can carry them easily.”

Experts insist everything depends on the mix of passengers. For instance, an airport at a leisure destination like Maldives is likely to see passengers look for beach wear, sun glasses, T-shirts and liquor, but in a financial city like Mumbai, a passenger may want ATMs and a place to grab a quick bite.

“Some of the key objectives that are kept in mind while deciding the ideal retail mix are to try and serve all passenger segments, create a compelling and differentiated retail mix, offer innovative concepts, and at the same time, maximise the revenue potential,” says a GVK spokesperson.

COMMENT NOW