Airports are increasing their shopping options and private aviation is thriving, giving brands and retailers new stomping ground to fight back in the age of ecommerce by meeting consumers en route.

Airports boast some of the most high density foot traffic each day—in 2017, an average of 213,668 flyers passed through London Heathrow each day, totalling 78 million over the course of the year. As mall foot traffic decreases, brands and retailers suffer lower sales, and more shopping moving online, many airports and the brands and retailers that call them home are adjusting their real estate to capitalize on flyers. Some brands are pioneering vending machine retail, which comes with low maintenance and real estate costs, gives companies a way to experiment and supplement their sales, and provides consumers efficient and convenient purchasing options. At the same time, duty-free retail is growing, as airports renovate their tax-free real estate to encourage shopping. As airport retail becomes easier and more attractive, private aviation is also taking off, giving wealthy flyers a customizable travel experience fashioned to meet their personal needs.  

1) With vending machines, brands and retailers minimize the costs of real estate and store operations while coming to the rescue of on-the-go customers.

Japan is by far the leader in the vending machine space, with 5.5 million vending machines—the highest number per capita. On almost every block in Tokyo, vending machines spur more than $60 billion in annual sales. As in other countries and cities such as Singapore that are growing their vending machine commerce, Japan’s vending machine expansion was catalyzed in large part because of the country’s high retail rental fees, dense municipal populations, and a consumer economy bereft of high-quality sales associates. Generally, the vending machines are also outfitted with security cameras and include direct police lines to deter theft and vandalism.

Aside from the convenience and efficiency vending machines provide their on-the-go customers, the machines are cost effective for the brands and retailers that operate them. They unite low maintenance costs with the ability to sharply reduce staff—employees are only needed to restock the vending machines’ inventories. And, as the U.S. hops on the trend, the vending machine industry is growing, particularly in one location that optimizes for convenience, efficiency and high traffic: airports.

UNIQLO’s vending machines provide an alternative, experimental route to boost sales that has swayed the company’s long-term business plan.

In August 2017, the apparel brand UNIQLO began selling a limited selection of its best-selling menswear and womenswear in vending machines at airports and shopping malls. The products are released in small boxes or canisters and inventories are replaced to meet seasonal and local needs.

UNIQLO was well poised to sell items out of vending machines in part because its clothing is already predicated on simplicity and functionality, which was a good match for the added ease of vending machines commerce. Airports in particular provided an opening for the brand to expand its retail experience with products like its light thermal jackets, which flyers can pick up if they forgot to pack a warmer layer. The only downside is that customers cannot try an item on before finalizing their purchases.

While UNIQLO wants to grow its brick-and-mortar footprint, the company has failed to meet sales expectations in all of its 45 existing locations. Though its New York City flagship store has seen success, the company continues to confront obstacles in its suburban locations. Like a pop-up—which UNIQLO has also utilized—vending machines allow the company to experiment with lower-cost, de-risked retail real estate. This has also significantly altered UNIQLO’s geographic strategy; the success of its vending machines means that the company no longer feels it must break ground and establish a store in every major city, which saves both time and money. Airports have a high-enough density that the company can use vending machines to boost sales, while also gathering insights on consumer interests.

Benefit Cosmetics and Best Buy are using vending machines to sell high-quality travel essentials in airports.   

Other brands that have strategically entered the vending machine market are Benefit Cosmetics and Best Buy. Benefit, a beauty brand founded in 1976 and acquired by LVMH in 1999, opened its first Glam Up & Away! vending machines in 2013, selling 30 best-sellers to airport travelers. The bright pink, truck-like machines unite immediate gratification with relief from customers who can make a last-minute purchase for a beauty essential forgotten at home—and they’re hard not to notice, even as travelers speed walk to their terminals.

Similarly, Best Buy introduced its Best Buy Express vending machines in 2008—in 2017, it operated a total of 183, the majority of which live in airports. The company says the machines reel in millions of dollars in revenue, in part because of the high-priced inventory—mostly electronics and electronics accessories such as Beats by Dre. Customers can also return the items in store or online and apply Best Buy’s price match guarantee policy. Taking up only a few square feet, vending machines like Benefit’s and Best Buy’s tap into an pre-existing but untapped market—successfully gaining customers en route with necessary essentials, and breathing new life into airports.

2) The growth of duty-free commerce taps into to the wallets of harried travelers and tourists in need of convenient gifts and souvenirs.

Duty-free, the traditional retail option available at airports, is undergoing a renaissance. Since the 1940s, travelers have turned to duty-free shopping for tax-free items like cigarettes, alcohol, and chocolates, as well as luxury products like perfume. Many flyers choose duty-free to protect the items from being damaged or stolen from their suitcases—others go to the stores to buy a last-minute gift for a family member or friend. Still others make duty-free purchases to pass the time during a long layover.

Today, duty-free retail is growing. Dufry, largest duty-free airport retailer in the world, witnessed same-store revenue growth by about 8% in first nine months of 2017, compared with same period in 2016—its strongest performance since 2011. In 2017, the company’s net sales reached approximately $8.5 billion—6.6% higher than 2016—and its gross profit grew 8.6%, reaching $5.2 billion.

London Heathrow renovated one of its high-traffic international terminals, turning a layover into a duty-free shopping event.

Heathrow Airport in London is a trailblazer in the duty-free arena. In the first half of 2016, the airport saw duty-free revenue grow 7.7% to approximately $87 million—one of the world’s top five grossing locations. These increases came after renovating one of its busiest global terminals, adding new brands to capitalize on flyers, especially those coming from abroad who are more likely to spend money when they make a connection or arrive to London.

In November 2016, knowing that Chinese travelers are frequent shoppers of airport retail—who  may even plan their purchases before a flight—Heathrow integrated a mobile payment system  to facilitate seamless purchases, which an increasing number of Chinese consumers are accustomed to at home, and which also eliminate the need for currency exchange and the bane of exchange rates. The airport further incentivizes shopping, showcasing different brands in the advertisements that pop up on travelers’ smartphones as they connect to the airport’s free WiFi. In the words of Simon Chatfield, the former head of Heathrow’s e-business and CRM: “We are looking to treat your time at the airport as an event itself”—which the airport is steering to revolve increasingly around retail.

Dallas-Fort Worth Airport updated its duty-free real estate to steer more travelers to make purchases.

Whether an impulse purchase, a gift or a souvenir, U.S. airports are beginning to catch up with the growing international trend, improving their duty-free retail experience to attract customer-travelers. Some airports are also playing with the real estate as a retail playground in order to harness the intersection of time scarcity—or tedium—in traveling with spatial awareness.

After establishing new agreements with state and local taxing authorities, the Dallas-Fort Worth Airport in Texas updated and expanded its duty-free retail in a way that literally forces flyers to shop. American Airlines, for instance, agreed to remove some seating and direct more international flights to the terminal that sits next to DFW’s newly renovated shopping area, which is also nearby a busy TSA screening checkpoint.

DFW chose not to label the retail section as “duty-free,” which often deters domestic flyers who think they can’t reap the discounts or is equated with only alcohol and cigarettes, rather than the much wider range of products available, from luxury items to local, artisanal goods. Many brands at DFW have their own stands, much like boutiques in high-end malls—a second floor is also devoted to events like tastings. In January 2018—the first full month of the renovated store’s operations—the airport’s duty-free sales rose 47%, compared with the previous year.

Like a shopping mall without doors, other airports can steer flyers to make purchases by putting duty-free on the route from security checkpoints to gates, or by establishing a duty-free VIP voucher program like Heathrow’s. As more airports outfit their spaces to reap commercial gains, they will likely attract more travelers to choose these hubs for their connections—a way to increase bookings for given airports, not just monetize travelers who are already in the airport. And, as brick-and-mortar retail struggles with falling foot traffic and the resulting lower sales in the face of the growing force of ecommerce, airports provide an antidote to brands that can utilize the unique space to connect with customers in person. The benefits also extend to the airports themselves, which receive a percentage of revenue from sales, much like department stores receive concessions from the sales of the brands they represent.

As duty-free grows within airports and it becomes easier to obtain duty-free licenses in some countries, duty-free shopping is expanding outside of airports, aimed at tapping into preexisting tourist industries. In March 2018, Dufry received a five-year contract to establish its stores in Hong Kong’s new railroad station, which goes to mainland China. Likewise, Seoul more than doubled its duty-free stores between 2015 to mid-2017, from six to 13 locations. These stores are meant to target Chinese tourists in particular—one of South Korea’s largest tourist demographics. However, expanding duty-free offerings specifically for one group of people has already proved precarious. In 2017, changes in the political sphere led to a Chinese economic moratorium on South Korean products and tourism, which plummeted the number of Chinese visitors to South Korea to 4.2 million—48.3% fewer than 2016.

3) Private jet companies are customizing travel for the ultra-luxury customer.

Though private aviation caters to a specific socioeconomic cohort, jet ownership—$40 million upfront—still remains an exclusive option. Many seeking luxury travel choose to utilize first-class commercial loyalty rewards programs, which are more cost-effective. However, private aviation companies are offering partial ownerships or by-the-hour booking that for a growing sector of the ultra-wealthy, is hard to pass up.  

The rationale lies in the advantages of private aviation. Using the service, customers can minimize the time spent booking or purchasing a flight and curtail the wait time they would normally spend in a public terminal to board a commercial plane. As a more flexible form of transportation, private aviation can adapt to last-minute scheduling changes, allowing passengers to exert more control over their travel experience. Many also perceive private jets to be safer than commercial flights because the planes are newer and more aesthetically appealing.

XOJET is building a luxury culture around private aviation, bringing flyers where they already want to go.

XOJET, an on-demand private jet company, is accessing the widening pool of luxury travelers with personalized and sophisticated aviation. Clients enjoy a fleet of 1,200 private jets of various sizes, customized catering and ground transportation. They also have access to a network of customer service reps, including a concierge and aviation advisors. XOJET’s burgeoning client base, now upward of 7,000, speaks to the surging popularity of private aviation; in 2017, program sales jumped 40% and the company’s charter-brokerage business grew 48%.

Customers not only have access to private jets, but also gain entry to an elite culture that XOJET is cultivating around the experience—espoused on its blog, Arrive. A recent blog post about up-and-coming designers at New York Fashion Week provides the company’s customer base with information about activities they naturally want know about, both building a community for the XOJET “club,” and seamlessly advertising its services—the top corner of each blog post includes a button to “book now.”

XOJET offers a range of memberships, some of which give priority access to flights and dole out other rewards. In 2017, the company also partnered with Canyon Ranch, a luxury spa in Arizona and Massachusetts, giving XOJET members access to additional benefits during their stay—and chartering the private jet they need to get to the spa itself. This way, XOJET is providing its clients with added services and benefits that they already want—a way to optimize customer retention and to freshen the XOJET experience, as it creates new partnerships to meet flyers where they are already going.

The Jet Business built a showroom that hooks customers with a taste of the luxury in-flight experience.

The Jet Business, founded in 1979 by Steve Varsano, sells and customizes private jets, giving customers ultimate sovereignty by meeting their interior design, crew staffing, operations, financing, legal representation, aircraft management and tax planning needs. The company’s showroom in central London reverse engineers aviation retail—the majority of the gallery is an actual Airbus A319—a mid-sized private jet—outfitted in suede, marble and mahogany, alongside orchids and bottles of Royal Dragon Superior Vodka that serve as accents. Above all, the brick-and-mortar address is highly cultivated to appeal to and capitalize on London’s elite and the city’s high-rolling visitors—customers can walk to the showroom from the Four Seasons London, before dinner at Nobu, or on their way to Harvey Nichols, the flagship location of the luxury British department store.

Varsano, who markets private aviation as a second home to flyers and opened the showroom in 2013, likes to call it “a time machine.” Customers can “board” an actual plane and try out the seats and beds, much like shoppers can test out luxury cars at a dealership. Varsano also uses an all-encompassing, floor-to-ceiling screen to present other aspects of the business.

Taken together, Varsano’s customers can live through the private aviation experience, while remaining on the retail sales floor—the result is reminiscent of IKEA’s sensory showroom experience, but with a heavy dose of luxury, which other travel companies have yet to establish. For such an expensive investment, even for The Jet Business’ clientele, the physical retail space likely converts into more sales, as they enter and test out the opulent landscape and cannot envision their next flight without the service.

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