Retailers Attempt to Take Off with New Stores
By George Anderson
It’s an increasingly familiar sight. Well-known retail chains are setting up stores inside airport terminals in their ever-continuing quest to attract new shoppers and satisfy current ones.
In Miami’s International Airport, businesses including Borders, Brookstone and Mindworks have opened for business.
In terminals across the country, airport managers are looking to upgrade retail facilities to keep customers happy while they wait for planes. Leading foodservice brands, such as Starbuck’s and McDonald’s, are now almost commonplace in most major airport facilities. Newark Liberty Airport in New Jersey includes Virgin Records, Kenneth Cole, DKNY, Discovery Channel Store, Metropolitan Museum of Art Store, Ron Jon Surf Shop, Sunglass Hut and many others.
Customers, such as John Stol of Columbia, appreciate the upgrades. He told The Miami Herald he travels through that city’s airport about 15 times a year. He spoke to the paper while shopping at a new Hudson News location. “This is top of the line,” he said. “Look, I’m going to spend $30 or $40 on magazines. The airport still looks horrible, but this step looks good.”
Moderator’s Comment: What marketing and business opportunities do airport locations offer retail stores? What are
the specific challenges retailers face operating in an airport environment? –
George Anderson – Moderator
Lease terms are clearly the key, but there are a couple of more pieces to the puzzle. The offering has to be “right” for the market and appropriate for the venue. Travelers don’t necessarily want to burden themselves down with excessive unplanned purchases. Also, these businesses are a bit more fragile than traditional retail. What happens if there’s another 9/11 or an epidemic? Their fate is really tied to the fate of air travel and we all know how stable an industry that is.
Generating increased revenues is a great benefit to implementing stores in airport locations but the exposure to new consumers might be the strongest benefit. Because these stores are generating exposure, an implementation of company standards is a necessary priority. Also, the current rapid rise in the number of strong brand name quick and full service restaurants operating in airports will cause increased competition for these spaces likely resulting in higher lease rates.
As a side note to implementing standards, I was recently in an airport retail store (to remain unnamed) shopping for a couple of ties. As I approached the register, I notice the cashier was no where to be found. In fact, there were no employees in the store. An employee from another retailer came over and informed me that the cashier I was looking for was in the bathroom and would be right back over. I ended up waiting nearly 10 minutes. I know this is just one silly circumstance, but it is concerning on a few levels.
I’d like to build on the comments people have made about the airport food. Yes, the airlines have scaled back considerably, and most of the available food options in the airport are greasy, overheated and so so bad for you. It seems like there is a real need for a food retailer who could sell healthy, convenient packaged meals-to-go that provide balanced nutrition instead of empty, fat-loaded calories.
THE SHARPLY-FOCUSED AIRPORT RETAILER
I go to the airport and what do I see?
Lots of high-priced items reaching out for me.
The experts say that’s because rents are high,
Venues are limited, takeoff times draw nigh.
Merchants seek new venues to get messages out,
To those customers who haven’t heard their shout.
They select “right items” and showcase them well,
To create impulse buys that ring profit’s bell.
Airline peanuts and snacks just create chagrin,
So Starbuck’s, McDonald’s are magnets therein.
Thus, after clearing security’s slow gates,
We’re captive in this sea of merchandise baits.
Thus airports are a milieu for you know who.
Retailers quite hungry for customers anew.
And so, good friends, the parade of shops arise,
For all want a share of this marketplace prize.
Reading the previous comments, most really make a lot of sense. With the expected wait to get through security, the experienced flier gets to the airport with plenty of time to browse the stores.
Why wouldn’t a retailer want to cater to this captive audience? Seems like the only constraint would be the size of the merchandise (getting it on the plane) and how long it might take to make the selection and purchase. As a customer, I want plenty of time to browse, but once my mind is made up, I want the rest of the transaction to go fast so I can get back to my gate.
While many airlines are scaling back their premier flight club lounges, seems like the airlines would have an opportunity to play in this game. How about if they opened stores or sold high quality meals from local restaurants, in case the traveler is tired of fast food fare?
Finally, I also have to agree that I see a lot of empty stores in my travels. I wonder what that tells us.
I had the privilege of opening a major retail operation in a new airport and, while I found it exciting, I also realized that we would not make our projections within the first week. Sales were off 40% and remained that way for over a year. Customers were quite adept at pocketing items and making a quick getaway – further ruining profit. Add to that the problem of employees’ wages being no better than the local malls – plus requiring them to pass an FBI screening (how many average employees could do that?). Also, having them shuttled in up to a half hour before their shift (without pay), and requiring them to stay (again without pay) until the next shift arrived, would cripple any operation!
The costs do not add up to the risks!
“Dear Mr. Retailer,
“I have a site for you where relatively affluent people are forced to spend hours with nothing to do while they wait for their assigned departure time. These people are often in a ‘holiday mood’ and ‘ready to spend’ as they leave on long awaited vacations. Or, they are frequent travelers who represent the professional level income earners who are well paid members by their organizations.”
What retailer in their right mind would not take advantage of this opportunity? As the article implies, the only reason retailers have avoided airports is that they often have barriers to entry that just have not made the opportunity economical. Apparently at MIA, it had been the high revenue percentage and, at other airports, it has been expensive rents.
I don’t know how they have faired, but I remember when Pittsburgh Airport put a limit on not only the rents but also the price point they would allow the retailers to achieve in order to make the shopping experience economical for the consumer. Airport operators must recognize the advantage “having something to do” can have on overall operations as it encourages people to arrive early and reduces the traffic jams that occur when passengers all arrive just before a flight (a 747-400 carries 416 passengers). By reducing the operating costs for various retail services so they can offer the consumer a reasonable price, they will hopefully encourage more spending and improve the experience for everyone.
There may be restrictions, as has been said before, as to the type of product passengers are likely to buy but there is still plenty of scope. Not just books and mags or nosh but luxuries and the essentials that you didn’t remember or have time to buy before setting off. Bearing in mind the many reasons why people are travelling means there is a pretty broad range of potential customers with a pretty broad range of products that might just tempt them while they’re waiting. As most of the flights I take are international, I always have time on my hands and find browsing an interesting pastime. And much as I normally resist impulse buys, I can often be tempted at an airport when I spot something that I just didn’t realise I couldn’t live without.
Airports present a great opportunity for some retailers if they take the time to get to know the environment. Airport retailing is substantially different than a mall or any other kind of retail location. Just because you’ve been in a lot of airports, doesn’t mean you know a lot about airport retailing. Before you even think about opening an airport location, it’s important to truly understand this unique retail marketplace. The leading publication in the airport industry is Airport Revenue News. Reading this important publication is a good place to start. They also hold an excellent conference every year.
You may also find it useful to talk with and partner with one of the many firms that operate airport retail stores for other well-known retail companies. These companies have relationships with airports and know the lay of the land. It’s also important to remember that opening and operating airport stores means dealing with local government bureaucracies that have their own way of looking at the retail business.
In addition to the correctly pointed out lease issues, several other challenges come to mind. First, few travelers want to have to carry additional bags with them through the airport and onto and off the plane. This mitigates against the size of the average ticket. Note that efforts can be made to ship to home on behalf of the customer, but then you have the non-immediate gratification thing to overcome, and a bunch of other operational hurdles.
Second, very few planned purchases take place in an airport environment. It’s almost all impulse or immediate need fulfillment related. In a boom economy, fewer purchases become planned, while in a slow growth one, more purchases become planned. There is a limit to the number and type of impulse related concepts which have sufficient appeal to generate profitable volume per square foot given the economics of location.
The airports are a retailer’s mecca – for the right type of retailer. The key to a successful airport sale is managing the retail mix and offering enough of the right products, fast enough, to the air traveler. Price is not an important consideration, and this enables airport retailers to ensure that their products amply pay for themselves and the premium costs of airport placement. Rapidly getting the right products into the consumer’s hands is key. No lines, easy product placement, and ample supply are key. Any type of food is almost a guaranteed success, since everyone needs to eat (especially now that airlines are eliminating most meals). Small consumer electronics, batteries, gadgets, pens, basic travel and clothing goods, and quick services are also big hits. The key is rapid service, quick choice and sufficient selection.
Most airlines have eliminated, downgraded, or begun to charge for in-flight food service. An upscale food chain or specialty store with a strong brand image and the capability to offer a strong “grab and go” array of food choices would benefit from immediate revenue gains as well as further enhancing their identity.
Just imagine the immediate response to a Kings or Wegmans at Newark Airport, by passengers facing a long flight and a short bag of peanuts.
I’ve noticed that airports that have a lot of retailers also have a lot of turnover and dark spaces. The demographics are generally better, since you don’t get the people who can only afford to drive or take the bus. However it seems when you are in the airport, you usually have someplace you need to be. Perhaps in one of ten flights do I actually have enough down time to even consider shopping or having a nice meal.
I, like the others, continue to note the tremendous expansion of retail space in major “hub” airports across the U.S. My own bias is that, in a major hub like Detroit, Chicago, Minneapolis, etc., it makes sense to provide convenient shopping access for the large numbers of frequent travelers who are often starved for time. I do not make many purchases in these outlets as I usually have more than I care to carry from flight to flight. I live in a smaller “spoke” city but would be a more frequent shopper if I lived in a major metro area. I found it interesting that the Brooks Brothers store at Detroit Metro was open at 6am on a Sunday morning…now that’s an example of the type of service these savvy airport retailers are trying to provide.
Assuming you can get a reasonable lease, it’s a good idea. And I think most retailers are doing a good job. Only snag I see, and I see it often, is lost revenues from either lines at the checkout (three people can spell disaster), generally brought on by clerks that are poorly trained, hampered with checkout equipment that isn’t suited to the job, or too busy talking to other clerks.
Setting up retail in airports is really no different than those annual kiosks that are set up in malls to bring unique products to consumers in places that they are looking for something new and different. The airport has a great demographic; we are not looking at low margins, and even companies like Target who, for the past few years, set up a “temporary” store in Manhattan to get in front of new potential customers. The airport is just another venue to get the message out and create a demand in other parts of the market.
Rent is the number one issue. Airport retailers have to make great margins to pay the huge rents. And the spaces are very small. There are no bargains for airport customers and there are no bargain locations for airport retailers. Jersey Gardens, a mall adjacent to Newark Airport, failed to generate great traffic from the airport itself. It’s too bad, since passengers often suffer through long wait times, and shopping can be entertaining.
What are your thoughts about the potential success of services such as spas or medical clinics in airports (i.e. like the retail clinics that are springing up in drug stores)?
It would seem to me given the increased hours people are spending in airports that this might be a good service enhancement.