What can Western airports learn from Asia?

At the 40th edition of the Tax Free World Association (TFWA) conference in Cannes last week, Jing Daily explored the state of travel retail in conversation with industry experts, from airport retail directors, to brand marketing strategists, and duty-free retailers. One consensus is so stark that it’s left unsaid in the industry: Asian duty-free retail airport strategies are outperforming those of the West. A lucrative space for luxury brands, due to reliable footfall and, of course, droves of wealthy shoppers, airports should not be overlooked in 2024 as drivers of brand growth. But innovation is of paramount importance to the new generation of flyers, and Asian airports, from Singapore to Hong Kong, are most in tune with doing just that. Unlike some competitors, Hong Kong International Airport has staged a strong post-pandemic recovery, bouncing back to a net profit of HK$1.61 billion ($207 million) in the year to March 31, 2024, after three straight years of losses. And, the majority of the Hong Kong airport’s revenue – 59%, or HK$8.06 billion ($1.04 billion) – was derived from non-aeronautical activity, including duty-free licensees, retailers, food and beverage outlets and advertising. This segment’s revenue surged 423.5% YoY to HK$3.93 billion over the period. Another leading shopping destination in Asia, Singapore’s Changi Airport, famed for its indoor waterfall, spans four terminals across more than 1 million sqm – roughly the size of 156 football fields. Renowned for its state-of-the-art facilities, including duty-free shopping and luxury hotels, Changi continues to set global benchmarks. The Changi Airport Group reported earnings of $431 million for the financial year ending March 31, 2024, a staggering increase from the $33 million reported the previous year. Total revenue jumped 45% YoY to $2.73 billion, driven by 62.5 million passengers, or 91% of the pre-Covid-19 level. Though Istanbul and Frankfurt’s airports are among those succeeding in duty-free retail, European airports are not at the same level as those in Asia. As it endeavors to reinvigorate its retail experience and rise to Asian competitors, London’s Gatwick Airport has hired a new head of retail, Stephane Geffroy, who was previously in Japan for six years working for Kansai International Airport as chief commercial officer for non-aeronautical activities. Here, Geffroy and Airport Authority Hong Kong head Lois Chan detail the factors that will improve luxury’s duty-free retail strategies. Bespoke consumer experiences Chan says following consumer journeys and crafting bespoke experiences have become essential to appealing to passengers across generations. “We put a lot of effort in upgrading everything, even our food and beverage, to make sure that anyone who comes in finds something that talks to them,” she says. “Even when we collaborate with brands, if they have campaigns then we make sure we are selecting a relevant consumer base and do targeted marketing.” Chan reveals that Hong Kong Airport has a better conversion rate than shopping malls in the Special Administrative Region. “Our consumers have already been educated before the trip on what they could buy. Once they’re there, we educate them more on what else they could buy,” she says. “We also have our loyalty program, which allows consumers to buy points and our conversation rates are very high.” On the topic of researching and tracking consumer characteristics, Gatwick Airport’s Geffroy says, “Moving forward, operators will have more data than we have at present, because they know what the same passenger is buying when they talk about traveling to different destinations. It is useful to gather information about people traveling to Chengdu or from Japan, when they come from Singapore, when they come from India, when they come from Europe, and then start gathering intel on that to inform brand marketing strategy.” The utilization of data should also be part of ongoing conversations that operators have with their landlords. “This is what we’re seeing and this is what is going to develop,” says Geffroy. “This is what we want to try. I think that could be very positive. So, the framework of this cooperation between a tenant and the landlord should close this [gap], especially when we look at durations of five to seven years.” Phygital engagement Whether it is gaming that relates to purchasing, or offering intimate VIC (Very Important Customer) messaging, interviewees agree on the importance of seamlessly integrating digital and physical retail at airports. “We had a pop-up Blue Bottle Coffee store, which opened last year,” says Chan. “The capsule concept looked like a small box and it did really well. When it launched, there was a mini game online, so people could play some games and get some goodies.” Along with an emphasis on phygital activation, Chan also outlines various playful marketing strategies, such as customers being able to dress up in costumes and take photos at the airport’s liquor and tobacco outlets. Another offering is concierge services. “Say there’s a guy who wants to buy something for his girlfriend before she departs, but she has no time; so he connects with our luxury concierge to obtain a little something, jewelry from one of our luxury brands, and have it delivered to the girl at the gate.” Smooth communication between landlord, retailer, and brands A trending topic among TFWA attendees is the significance of improving communication across the board. Structural issues come into play when planning brand activations or installations, but the marketing scope is expanded when landlords are onboard with aims and outcomes. “We have to ask questions such as: What are we interested in? How does the landlord explain what the drivers are? Is it purely revenue, or are we considering more the top line and being relevant to the passengers in the midst of both?” Geffroy says. In many instances, Geffroy adds, these questions are not defined. “The landlord is saying, OK, I want that productivity, and then they hand it over fully to the operator, which I think is a bit of a pity. So, there’s more to do in terms of working together, and especially in staying relevant to passengers.” The takeaway is that landlords need to be clearer on who the passengers are, and how that traffic is going to develop over the next few years. Examining the scenarios on the table so retailers and brands can better cooperate will be an area focus for Gatwick in the future, says Geffroy.

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What can Western airports learn from Asia?