The travel retail industry has come a long way from the mundane duty free shops and book stores. Perfumes, tobacco, and confectionary shops have also become a dime in a dozen at airports. 50% of an international airport's revenue is generated from duty free and travel retail activities. In recent times, the travel retail sector alone is estimated to be a $50 billion industry and is expected to bloom into $60 billion and grow up to 20% by 2015.
The concept of travel retail began 60 years ago. The Shannon airport, in Ireland saw the world's first duty free shop in 1947, and was a transit stop for flights between Europe and North America. Once the passengers had passed passport control, they got rid of all the duties and taxes on their purchases. The trend caught on to all of Europe and the rest is history.
The global travel retail sector is not limited to international airports; it also includes cruise lines, ferries, and ports. However, an international airport still enjoys the lion's share and remains the dominant player as far as this industry is concerned.
This sector is now home to many glamorous brands and attracts the luxury products category like Tommy Hilfiger, Ferragamo, Hermes, and Guess to name a few. The tiny pop-up stores are now turning into ritzy boutiques, and providing world class shopping experiences like no other, to impress customers, and get the sales rolling.
Fragrances and cosmetics still acquire 31% of sales in the single product category in travel retails. However, the luxury products that include fashion and accessories are the key players, and constitute 37% of the sales. Hence travel retail has become a shopping window to many luxury brands. According to TFWA, the world's largest duty free and travel retail association, the Asia Pacific is emerging to be the new market and accounts to 35% of sales, outperforming Europe and America, whose shares are 34% and 23% respectively.
The sales of travel retail outlets are directly related to passengers, who are wealthy, are in awe of big brands or to whom the privilege of buying certain products is not available back home. China, Russia, and Brazil top the list of affluent flyers splurging on luxury brands. Travelers from Middle East are the next target market in the travel retail sector and especially for the luxury fashion brands.
Consumers usually pick up products at travel retail stores for gifting purposes, for personal pampering, because a certain brand is yet not available elsewhere, and to solve the issue of tighter hand baggage. The environment that luxury brands provide at airports is of great importance. These new age, brand conscious consumers seek high customer service, and do not want to settle for anything but the best. They seek an exceptional range of luxury brand products and want to enjoy their shopping experience. Not to mention, providing personalized and customized products will be an icing on the cake.
On the other hand, travel retailers are making efforts to stand true to the expectations of the consumers, and identify buying trends and behaviors. Luxury brands are trying really hard to please their consumers, with their latest collection at the travel retail outlets. There are a few loop holes that these brands need to fix before they venture out to the target market.
Luxury brand retailers need to train staff, who can give useful insights to the buyers; make sure of availability of garments in all sizes, get timely delivery, stock up with brand new collections, take care of fittings, and after sales services to assure confidence into consumers before they spend their big bucks. Luxury retail brands are already working on ideas like getting flight details of potential consumers and updating them before hand, and even providing deliveries to a consumer waiting at the airport lounge for a pre-ordered personalized garment.
The Airports Council International (ACI) expects the passenger numbers per annum to grow up to 4.9% by 2014 in the world and that, for Asia to grow up to 8.9% per annum. With large amount of airport investment pouring in Asia, for the development of the tourism and travel sectors in countries like China, Vietnam, India, Indonesia, and Myanmar, retail facilities will improve and continue to flourish. More than 70 new airports are planned to be built by China in the next decade, and India's investment in the aviation sector is estimated to be $ 20 billion, giving impetus to the travel retail sector and a rise in the potential markets for luxury brands in these emerging economies.
The concept of luxury brand purchasing in the travel retail sector is flying high, and is going to expand, by providing better shopping experiences, and exploring new markets. The interesting merger of luxury brands and travel retail will help high flyers all around the world stay fashionable and indulge in shopping even while they are on the go.