Beyond duty-free: the future of aviation retail

Since Covid19, airport footfall has been characterised first by the bounce back and now by the reversion to long-term trends in passenger volume growth, with a notable shift in the core demographic of passengers [1]. In this article, our Strategy team explores how airlines can optimise passenger experience.

Commercial airports were brought to a standstill in 2020 due to the pandemic, and afterwards while borders gradually reopened, it was not business passengers who returned surpassing 2019 numbers, but Gen Z and millennial leisure passengers.

And the market opportunity is large. The airport retail and duty-free market was valued at $57bn in 2023 and is projected to grow at 13% CAGR by 2028 [2]. The highest growth is anticipated in the Asia-Pacific region, although growth is strong overall globally.

To capture this growth, airports are tailoring their retail passenger experience to maximise revenue.

Airports are offering personalised services to enhance the travel experience. This includes tailored loyalty programs, exclusive product lines, and pop-up experiences that add significant value to the airport shopping experience.

Travellers often take advantage of tax-free pricing to purchase premium products or make bulk purchases and personal shoppers allow passengers to get the most out of these airport shopping experiences. This rise in the personal shopping offering is helping to drive sales of high value items – primarily targeting the luxury retail subsector. [8]

Additionally, many duty-free operators who supply multiple airports have rewards programmes, allowing passengers to avail of loyalty points as they travel the globe. The certainty of standard, premium offerings across multiple locations can be a draw for frequent flyers. [9] These rewards programmes drive passenger spend and loyalty, and can increase traffic to smaller airports as well as larger international locations. [10]

Localisation and cultural integration are also becoming key elements in airport retail. Airports are incorporating local culture into their retail spaces to provide travellers with a more authentic experience. This approach not only enriches the travel experience but also supports local businesses and promotes cultural exchange.

Sustainability is another important trend in airport retail. Some surveys suggest that up to 65% of consumers prefer brands that align with their sustainability goals. [11] By prioritising sustainability, airports can attract environmentally conscious travellers and contribute to global efforts to protect the planet. [12]

Global airports are seeking to capitalise on an increasing consumer focus on enhanced wellness and leisure activities. Demand for healthier dining options has grown rapidly, as evidenced by the growth in healthier food franchises such as EXKI in Italy, Belgium, and France. [14] Equally many airports are seeking to step beyond typical lounge offerings, with enhanced wellness features including spas, wellness experiences, and even sporting facilities into their offering. [15]

Some airports are also tackling passenger wellness from a holistic angle, incorporating nature and animals into the passenger journey for those experiencing flight-related or crowd induced stress. [16]

All these enhancements over typical airport experiences aim not only to increase dwell time at airports but also encourage more frequent travel.

Airports are ubiquitous in leveraging social media and influencers to enhance their retail experiences. Influencers often share their experiences on platforms, attracting more travellers to explore airport shops. By incorporating engaging elements such as art installations and experiential, visual pop-ups, airports cater to the modern traveller's desire for unique and shareable moments.

By integrating such experiences, airports boost passenger satisfaction and generate organic social media content, reaching a broader audience. This strategy not only boosts the airport's visibility but also positions it as part of the destination for travellers seeking unique shopping experiences. [17]

While enhanced retail experiences undoubtedly improve passenger experiences, there are significant challenges for airport retail operators.

The most obvious are limitations imposed by existing infrastructure. While greenfield airport facilities can be designed to incorporate the latest technologies and provide improved passenger amenities, existing airports were often designed to minimise dwell time and direct efficient passenger throughput. This causes issues for traditional retail and duty free, as it allows passengers to merely sail past retail outlets.

When envisaging a new “end to end” retail experience, it is often easier to start fresh, a luxury unavailable to busy international airports. Change is possible, and worthwhile, but it is challenging.

For example, for New York’s LaGuardia Airport required an intensive transformation including enhanced retail opportunities, new airside infrastructure and a new terminal, the cumulation of a decade of works. It has yielded positive revenue and customer satisfaction results. [22]

There are also less obvious risks with redesigning the passenger retail experience. An overemphasis on technology can have a negative effect on passenger experience. There is undoubtably a fine line between aiding passenger journeys through helpful mobile prompts and becoming an intrusive presence in their pocket.

Equally customer preferences can vary massively based on nationality, age profile and interests. Each of these can move the sliding scale of available offerings, promotions, and “features” of a customer focused retail experience from helpful to annoying.

• There are more tech offerings than ever before to help get the fundamentals like check-in, security and immigration right. Negative experiences here will outweigh efforts elsewhere so ensure your enhanced passenger experience starts with ‘brilliant basics’.
• Demographics differ significantly by airport, even within the same metropolitan area. Research the specific travel patterns of your frequent travellers and their resulting preferences on engagement and technology, without losing sight of longer-term trends in your inbound and outbound audiences.
• Don’t be afraid to integrate local culture and businesses with international household names. This should be considered within a wider and coherent vision from the next interior refit through to the ongoing prioritisation of specific concessions.