“Airports will become the single place where people do physical shopping” – Discuss

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Martin Moodie
Martin Moodie is the Founder & Chairman of The Moodie Report.

There’s something happening here
what it is ain’t exactly clear….
I think it’s time we

stop children, what’s that sound
everybody look what’s goin’ down
there’s battle lines bein’ drawn
nobody’s right if everybody’s wrong
young people speaking their minds – Buffalo Springfield, ‘For what it’s worth’

Yes, I know I’m showing my Woodstock-era age with that choice of song lyric, but the opening two lines sprung to mind yesterday as I wrote the story about Manchester Airports Group launching a technology and e-commerce business, called MAG-O.

MAG-O, is a response to technology-driven changes in the way passengers travel and in the way they experience (or expect to experience) airports, the airport company says. It is designed, simply (or maybe not so simply), to move the airport experience into a new digital era.

The announcement came hot on the heels of Changi Airport creating a start-up cross-border e-commerce subsidiary called E-Concierge. Pertinently, both MAG-O and E-Concierge will operate independently of their respective parent companies.

These are not superficial forays into the digital universe but profoundly ambitious, investment-heavy projects.

MAG-O, for example, has recruited a team of 65 “experts drawn from the technology industry’s biggest names”, including software developers, designers, system architects and user experience specialists. 65 people is an awful lot of cost, and therefore commitment. E-Concierge is mounting a similarly intensive recruitment drive in Singapore.

What will each organisation do? E-Concierge, we are told, will “implement a calendar of activities across all main online and social media channels to lead traffic to the e-commerce platform. These campaigns are designed to drive conversion, customer retention and increase transacted basket size.” For a new e-commerce business, remember, not for Changi’s existing business.

“If we don’t start to embrace the future we will become irrelevant. We will end up with airports that have really good F&B, a few souvenir stores unique to the country, and that’s all. This is the prospect we face unless we learn to embrace and partner with the likes of Alibaba.” – Richard Barker, Auckland Airport

MAG-O aims to “improve the passengers’ end-to-end experience of using MAG’s three UK airports through the introduction of better technology and innovative new online products.” Two different propositions then, but similarly bold visions.

These are not isolated initiatives. At November’s Trinity Forum in Bangkok, Auckland Airport General Manager Commercial & Retail Richard Barker revealed that the airport company plans to create a virtual mall for its existing partners. “We want to create a marketplace where our partners can reach customers beyond the physical environment,” he added.

The scale of the investment, said Barker, is not about incremental revenue tomorrow, but looking further beyond. “In five years’ time, I want to be in the position where we have a viable business platform for duty free retailers to partner with us. It’s not just about creating resilience within our own business model, but also forming opportunities to grow.

“If we don’t start to embrace the future we will become irrelevant. We will end up with airports that have really good F&B, a few souvenir stores unique to the country, and that’s all. This is the prospect we face unless we learn to embrace and partner with the likes of Alibaba.”

During the same discussion, AOE Founder & CEO Kian Gould said that the logical way for travel retail to adapt to the changing consumer world is for airports to become digital ecosystems

To do that, airports must partner with other service providers to create a marketplace of their own, he argued. “For the longest time the travel retail industry thought e-commerce was not suitable for travelling consumers,” Gould commented. “But look at examples like Alibaba, which has proved you can sell almost anything – even cars – online.”

Changi Airport Group Airside Concessions Division, Online Retail General Manager Nicole Foo noted: “In the next five years, digitalisation will be part and parcel of the airport shopping experience. We need to bring the service to the customers.”

Since then, London Heathrow Airport has announced that it (like Auckland Airport) has partnered with AOE to create an improved digital marketplace for the hub’s300 brands. The airport will launch AOE’s OM³ (Omnichannel Multi-Merchant Marketplace) suite as part of a “digital transformation strategy”. OM³ will be used to digitalise Heathrow’s non-aviation revenues and provide customers with a “unified and seamless online and offline experience.

These are intriguing initiatives and one, by dint of the serious players involved, to be respected and monitored.

“In similar moves to some shopping malls, large airports are replicating their physical offers into an online world.  If airports were right, then the large shopping malls in the world would now all be very successfully competing with Amazon. They don’t.” – Stephan Uhrenbacher, Flio

But here’s a contrary viewpoint, which is worth airing in the context of the debate. It comes from Stephan Uhrenbacher, the creative spark behind Flio, designed as a global airports app (and already working with ten leading hubs).

 It comes in an article titled, ‘Airports and e-commerce: Does this make sense?

Here we produce it in full. What do you think? Let me know your views at Martin@MoodieDavittReport.com or via the comments section at the foot of the page.

By Stephan Uhrenbacher: As I write this at the end of 2017, e-commerce is 9% of total retail. Few forecasters dare say where this growth may end. Retailers and commercial property developers have seen their value plunge. Everyone is scared of Amazon.

Airports replicating e-commerce?

With that, airports are now starting to invest in e-commerce. In similar moves to some shopping malls, large airports are replicating their physical offers into an online world.  If airports were right, then the large shopping malls in the world would now all be very successfully competing with Amazon. They don’t.

“Even for the most online-savvy consumers, airports will become the single place where people do physical shopping.” – Stephan Uhrenbacher, Flio

The unique factor of airport shopping is that a consumer has time to spend at airports. And with air travel still being limited to the wealthier part of the global population, people will continue to shop at airports. Yes, people do compare prices with online offers. So, an airport will increasingly have to be competitive.

But the good thing: Even with a much higher share of online shopping and even for the most online-savvy consumers, airports will become the single place where people do physical shopping. So, for any goods that you may want to taste, sample, try on, or just get your hands on, an airport will continue to be able to offer a great shopping environment.

This unique competitive advantage (other than being able to offer favourable pricing due to tax regulations) goes away if airports & duty-free retailers are forcing themselves online. Not only does the entire value chain of duty-free not have any competitive advantage over Amazon:  They may shop online while they wait – but why would they go to your offering and not to Amazon? Amazon already knows their preferences, payment methods and has an unlimited choice. The carefully curated airport mall – now replicated online – does not.

The right digital strategy is one that gets people into your shops.

Instead of investing in replicating where they can’t win, airports, retailers and travel brands should simply focus on the passenger. What can we do to reduce stress for the passenger?

How can we tell her about that great offer we want near Gate B8? This will require some huge effort which is bigger than individual airports. No matter whether you focus on a new CRM, faster security of better POS Systems, or work with FLIO: The goal is to get from their digital device into your shops, not to try and outsmart Amazon at their very own game.

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  • There is one flaw, well two actually, in this thinking.

    Digital Traffic and Fulfilment of the goods. Firstly, all well and good to go Digital, but as Travel-Tech has learned, the cost of Customer (Traffic) acquisition is enormous. How are all these Digital channels going to acquire their traffic? Even Kian Gould [of AOE] has admitted to this in his very own MDR article last year. These new channels are currently relying on search marketing, (a veritable lottery), social (a time consuming, soul-destroying daily chore) and content generation, also costly and not guaranteed and the hope of app downloads (a matter of fashionable trends).

    Not to mention that airports leave their retailers with no money for digital marketing, affiliate commissions or allied activities. This means that we have all this innovation, but no guaranteed traffic, certinly compared to Amazon or Ali Baba.

    As for delivery of the goods…. scan any Airport or Retailer website and the last thing you will find (in general) is “where do I collect my goods from?” Not to mention, if you don’t speak English, you are likely filtered out. MAN/STN websites are a good example of this.

    These innovations need to link direct to Airlines or OTAs for real engaged traffic. But, someone needs to pay a commission for this… there lies another issue!