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.

Easing the passenger journey through technology

Airports are leveraging technology to offer seamless passenger experiences. This includes premium “fast pass” security and check- in solutions, catering, retail, flight updates and more.

This use of technology is allowing airports to automate - streamlining operations while increasing efficiency.

Examples

Dubai

Dubai Airport aims to reduce passenger stress, having launched DXB&more ^[3] , which allows mobile ordering of food, beverage, and retail – with delivery to a gate, lounge or ready for pickup. Dubai is seen as a leader in aviation retail, generating ~45% of its income from retail. ^[4]

Singapore

Changi airport has installed a 14m digital display named ‘The Wonderfall’ – this digital waterfall is aimed at reducing passenger stress, creating a calming digital experience inspired by nature, accompanied by serene piano music to alleviate passenger anxieties, and cultivate a sense of calm in the departure hall. ^[5]

Dublin

Dublin airport offers WhatsApp updates direct to your phone, including any information regarding last-minute flight changes. This allows passengers to focus on duty free and dining options without worrying about missing flight updates. ^[6]

Belfast

Belfast International airport has introduced robots as servers in their food court. These robots, which have a cat-like design, are popular with passengers, creating a memorable airport experience while improving efficiency. ^[7]

Creating a more personal, approachable retail environment

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]

Examples

London Heathrow

Heathrow, which generates over 20% of its income through retail, has introduced personal shopping to help further drive retail revenues. ^[13]

Multiple airports in the US

ThanksAgain is a loyalty scheme which specifically targets passengers in an established retail network. This popular scheme in the US focuses on driving passenger volumes to smaller airports as well as covering larger international locations.

Marseille

Marseille airport has modelled its duty-free interior to reflect the local character of Provence; the seating is shaped like sail boats, and they play ambient local music.

Zurich

Zurich Airport is a leader in the area of sustainability, with a comprehensive approach to waste reduction.

Becoming part of the trip, not just a means of transit

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]

Examples

Amsterdam

Amsterdam Schiphol airport have introduced enhanced wellness features, from somewhat common self-service massage chairs to a more exclusive in-airport spa. ^[18]

Doha

Doha Hamad International airport have stepped beyond typical spa and wellness experiences, incorporating a full gym, swimming pool and squash courts into their offering. [19]

Istanbul

Istanbul airport has introduced therapy dogs to enhance the passenger journey for those experiencing stress. ^[20]

Singapore

A series of gardens interlace the passenger journey [21], focusing on nature in an effort to transform the typical airport environment.

San Francisco

San Francisco International hosts art exhibitions and relaxation zones, which has driven their popularity and presence on social media.

Challenges and trade offs

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.

Finding the right balance for passengers

Getting the balance right between immersive technology and ‘human touch’ in this evolving landscape is important for providing the best experience to passengers.

While cutting-edge technologies like gate-to-gate concierge services and personal shopping apps can significantly elevate the level of personalisation, it is the human touch that makes passengers feel truly recognised and prioritised.

When it comes to developing a holistic customer experience, some airports are incorporating constant feedback loops to stay at the forefront of the customer retail experience, utilising feedback features in airport apps and scannable QR codes in prime retail locations, allowing and prompting passengers to rate services in real time.

However, it is important to acknowledge that implementing changes in aviation retail can take time. Through introducing small scale ‘pop-ups’ that can be quickly revamped, airports can adapt more swiftly to the evolving needs of travellers, as well as test new concepts before committing to incorporate more permanent solutions.

This method not only keeps the retail environment fresh and engaging but also demonstrates a commitment to continuous improvement. By integrating advanced technology with genuine human interaction, airports can create a seamless and memorable journey.

When it comes to developing a holistic customer experience, it can be difficult for airports to strike the right balance between exploration and exploitation.

Examples

Hong Kong International

Hong Kong International airport leverages passenger data, behaviour, and preferences to create a tailored experience that resonates on a personal level. ^[23]

China

Shiseido's "Red Ginza Street" pop-ups across Shanghai Pudong Airport and Beijing Capital International. Through these pop-ups, Shiseido launched a testing concept combining technology and beauty to engage passengers with interactive elements and personalised skincare consultations. ^[24]

Conclusion: implications for operators and concessions

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.