Airports are Outperforming Department Stores for Luxury Brands
Not long ago, we spoke with Jeremy Smith, the president of airport-based consumer electronics retailer InMotion, about the challenges and benefits of being an airport-only shop. InMotion, which is in the midst of celebrating its 20th year in business, has exploded onto the scene in its relatively short two decades in existence going from a kiosk-only movie rental hub for travelers to an international brand that raked in $163 million in sales last year—good enough to rank 55th on our Top 101 consumer electronics retailers list.
InMotion is an excellent example of how the properly designed and executed airport retail strategy can result in tremendous success for a company or brand. But, as Smith told us in our conversation, there’s another side to this equation that really makes airport retail something of an exception to the rule: foot traffic is never going to be a problem in this space. And it’s that exact point that has led some of the top luxury brands across all retail channels to place a greater emphasis on airport retail. In fact, as a recent Wall Street Journal report pointed out, those luxury brands are now, for the first time, realizing more success in the airport than they are in their most traditional retail environment: the department store.
In 2018, makeup brand Estée Lauder Co. generated more revenue at airports globally than they did at U.S. department stores, which for decades has been the main driver of sales for beauty brands.
“Very few channels have almost guaranteed traffic,” Olivier Bottrie, the head of Estée Lauder’s global travel-retail business, told the WSJ, echoing what Smith told Dealerscope. “When a department store goes away, it’s not a major catastrophe. But if a major airport went away, it would be a major catastrophe.”
Global sales of duty-free and other travel-retail channels role more than 9 percent in 2018 to reach a record high of $76 billion, according to Data Circle. That figure is nearly double the $43 billion the channel generated in 2010. It encompasses sales from airport shops, in-flight purchases, duty-free stores that neighbor airports, cruises, and online orders picked up at the airport.
Specifically looking at the consumer electronics market within the travel-hub space, the segment is expected to experience its own boom over the next decade. According to market research firm Fact.MR, airport CE retailers are expected to see a compound annual growth rate of 6.3 percent through 2028, slightly below the 8.7 percent CAGR the travel retail market in general will realize through 2025.
And all of this simply boils down to the constant and growing traffic in airports today. According to the International Air Transport Association, 4.378 billion passengers got on an airplane in 2018. Looked at from a retail perspective, brands had 4.378 billion potential customers walk through their store. Astoundingly, in the IATA’s 20-year outlook, the association expects air travel to balloon to 8.2 billion by 2037. So, while traffic in malls across the country is quickly declining, brands have a unique opportunity to get in front of a different—and very captive—audience at airports across the globe.
What We’re Reading
- Consumers are overestimating the capabilities of Tesla’s Autopilot, according to a recent study. (Digital Trends)
- In rare misstep, Apple announces battery recall on 2015 15-inch MacBook Pro models. (Appleinsider)
- Netflix is experimenting with making your phone vibrate during movies, akin to video game controller rumble packs of yesteryear. (PCMag)
Related story: Ep. 50: InMotion Reflects on 20 Years in Business