What will travel retail look like post-Covid-19?

Alain Maingreaud, TFWA President takes some time out to put across his views on what the sector of travel retail could look like as the world tries to return to a ‘new normal’ in the wake of the coronavirus and its devastating affect around the world.

You don’t need to be an economics expert to understand that when international travel ground to a halt in February and March, describing the effect on the duty free and travel retail business as a body blow would be an understatement.

The figures are truly horrifying. Of course it all began in Asia, the global travel retail industry’s largest market by far. In the period from January to May, the number of international tourism arrivals to Asia regions fell through the floor. North East Asia was slammed by a 74 per cent fall, being the worst hit, and this figure is all the more worrying as the year actually started well for the industry.

The impact on the retailers who depend on these travellers was similarly dramatic. The world’s largest travel retailer Dufry reported that its sales slumped by 90 per cent in April, while retailer Lotte Duty Free saw sales drop 37.5 per cent in the first quarter of 2020, compared to the same period last year.

We now all understand that there is a long way to go before travel returns to anything like the levels we have seen in recent years. Travel and travel retail, have been through some tough times before, such as the impact of the SARS crisis, and the fallout from 9/11. We recovered then, and we will recover again, but there’s no doubt that it will be an uphill struggle.

THE APPETITE FOR TRAVEL

The desire to travel is ingrained in human psychology. While Zoom, Houseparty and Teams have become part of our everyday business and social lives, we need face-to-face interaction with our friends, families and colleagues, and no amount of technology can change that.

A recent study by travel retail specialist M1nd-set, found that the enthusiasm for the journey has not dimmed. Over 60 per cent of international travellers taking part in the survey said they will fly again within the first three months of Covid-19 travel restrictions being lifted.

SPEND, SPEND, SPEND

We’re not going to stop shopping either. ‘Revenge shopping’, a term first coined in China which sees shopping-deprived consumers heading to the malls after months of not being able to spend, is leading to the emergence of some green shoots in Asia. When the Hermès flagship store at Guangzhou re-opened on 11 April after the close down, it reported sales of over 2.6 USD million in just one day.

That latent demand is likely to spread to the airport, and 40 per cent of travellers interviewed in the M1nd-set study said they will visit the airport shops when at the airport.

THE SHAPE OF THINGS TO COME

However, the way people interact and behave in our stores is likely to be different. A significant majority of passengers in the M1nd-set study (62 per cent) say they will avoid interaction with sales staff when in the shops and over half will avoid touching or tasting products. This will mean a degree of reconsideration of the way we serve and promote to customers.

The profile of passengers is also likely to change. Leisure travel is likely to recover faster than business travel, skewing demand in our shops. The cost of travel may also increase, as airlines may have to hike up sanitation and run flights with fewer passengers on board. This could mean that the more wealthy account for a larger percentage of our passengers, and these travellers may be looking for a different range of products and brands at the airport.

OPPORTUNITY FROM ADVERSITY

While it’s not easy to see how the current crisis can shape us for the good, if there has ever been a time to take an opportunity to change things for the better, it is now.

I’ve regularly said that the duty free and travel retail sector can’t carry on doing business in the same way that it has done for the last 50 years. But in a market rooted in the bricks and mortar world of old-style retail, we’ve not always been quick to embrace new technology.

We’ve not been as swift as we should to capitalise on the opportunities of e-commerce, but the current crisis has prompted a massive leap in the demand and acceptance of online retail. We can and we should bring customers outstanding retail experience in airports, which offer abundant opportunities to create spectacular retail spaces. But now more than ever we need to make sure that this is linked to the best online retail, speeding what customers’ want, where they want it and when they want it.

In addition, the airports of tomorrow will need to work hard to convince people that they are safe places to be. Touchless technology, already widely used for processes such as check-in or boarding, will be in even greater demand. This will apply in retail spaces too.

Some elements of the way we need to change however are not technological, but to do with the shape of our business. A grievance that has blighted our industry in recent years is the imbalance in the relationships between airline operators, airport landlords, the retailers that operate at their terminals and the brands they sell. I very much hope that the current situation will provoke a rethink of what is undoubtedly an outmoded business model, and we need to co-operate to share the pain of tough times, as well as the spoils of success. We will survive by working together. Or we will not survive at all.

‘Next Page’ – A New Model for Travel Retail