Over a billion people travel internationally each year—approximately 15 percent of the global population—and they spend the equivalent of more than a trillion dollars in the
process. 40% of global luxury spending is by travellers. Are you positioned to capitalise?
The sixth continent
Because of the increasing importance of travel retail companies such as L’Oréal refer to travel retail as the sixth continent. According to Barbara Lavernos, Managing Director of L’Oréal Group Travel Retail, “The travel retail distribution channel is a strategic market for the development and visibility of our brands, and contributes to the quest of one billion new consumers.”
Increasing tourism and expanding middle classes
International tourism continues to rise above expectations despite continuing global geopolitical and economic challenges, and sales have grown by more than 12 percent a year since 2009. Half of that growth has come from an increase in travellers, especially from emerging countries like China. Much of the rest is due to the willingness of travellers to shop en route and abroad (and etailers’ improved capability to serve them). The expanding middle classes of emerging markets are travelling to the world’s capitals and boosting sales, especially of luxury products, and this is benefiting the developed economies of the U.S. and Europe. Over half of France’s 16 billion Euros luxury industry depends on tourists. You can expect retailers to continue catering to high-spending travellers, especially emerging market tourists, to drive growth.
Perfect conditions for shopping
Travel retail provides new opportunities to engage with consumers. Travellers often have time for leisurely shopping due to lengthy wait times at airports, and international travel often promotes a sense of personal achievement, both conditions providing a good atmosphere for experimentation and indulgence. In a recent survey by JC Decaux 83% consider shopping an important part of their trips.
Regional diversity provides cushion
Globally, world economics is an uncertain place. But the regional diversity of travel retail helps cushion the impact of external shocks. The buoyancy of Asian and Chinese demand has been further support. By the end of 2010, the travel retail market had fully recovered from the 2009 financial crisis and even exceeded the 2008 level — a strong performance in Asia-Pacific and the Middle East more than offset a slower recovery in Europe and Latin America.
A myriad of opportunities
Travel retail presents plenty of opportunities – both tapped and untapped.
The Golden Hour
Airport retail is morphing from sundries and souveniers to luxury goods and brand experiences as retailers take advantage of the captive audience they have between security and boarding.
Data labs for retail experimentation
Airports have become laboratories and an important source of data, allowing companies to experiment. For example, World Duty Free Group (WDFG), Heathrow Airport’s “anchor” retailer, uses airport data to better prepare for international arrivals, such as ensuring that speakers of the right languages and cultural sensitivities will be on hand. They can even reconfigure shop displays to suit the national tastes of travellers passing through. There is power in knowing that Brazilian women are happy to have perfume spritzed on their bodies; with Chinese you should use a tester.
Building brand awareness
In response to these opportunities many companies are investing in building brand awareness in emerging countries, even when the targeted consumers may not purchase those brands at home. This is because these consumers are keen to acquire foreign and luxury brands while travelling, especially in developed markets which offer superior product selection and availability as well as advantageous price comparisons due to high import taxes in home countries.
Customer Engagement beyond transactions
Airports, with their captive audiences and promotional spaces, and airport travellers are known to be more receptive to marketing messages than the average consumer – they are ‘stuck’ in airports in search of entertainment. It’s a mostly untapped opportunity for brands, who could offer experiences – from innovative in-store digital engagement to make-overs to food and wine tasting.
Feeding travellers’ shopping appetite
There are many factors contributing to continuing rapid rise of travel retail – from increasing spend from emerging markets to improved understanding of how to cater shopping travellers through enhanced experiences. The benefits from sales and marketing perpectives are real. It remains for retailers to take full opportunity of this fast growing segment through understanding the travel market and how best to capitilize on potential.