For many travellers, their holiday often starts from the moment they arrive at the airport. You’ve just checked in and passed airport security, and now there’s nothing more to do other than relax in the departure lounge before your flight. And what better way to while the time away than by heading to a duty free to browse your favourite stores and bag yourself a bit of a bargain in the process.
However, the global pandemic has had a devastating effect on travel across the globe with the travel retailer sector one of the hardest-hit industries following the closure of airport stores in line with government health and safety measures.
What does the future hold for duty-free travel retailers?
Up until 2019, Tax Free World Association reported global travel was on an upward trajectory which saw many big brands and drinks companies investing heavily on marketing opportunities for their retail stores based in airports across the world. Duty Free provides an ideal opportunity for retailers to reach a wider audience where visitors have time to stop and engage with brands and discover the latest products on offer.
Travel retail venues at many major airports have reported a significant drop in sales since the start of the pandemic, especially for cosmetics and fragrance brands, which makes up the largest market share within the travel retail sector. Figures by the Office For National Statistics (ONS) noted there were just 398,000 visits made by overseas residents to the UK between April to June 2020, a 96% drop compared to the number of visitors recorded in the same period the previous year, with Heathrow Airport reporting a 55.8% decline in retail sales.
An article by Duty Free World Council stressed how sales for Duty Free & Travel Retail are the number one source of non-aeronautical revenues earned by airports world-wide and on average account for over 40% of such revenue. The council has made requests for specific support for the duty free and travel retail industry due to the significant contribution the industry makes to the aviation, maritime and broader travel and tourism industries as a whole. The council has also published a set of protocols to guide the safe re-opening of duty and tax free stores as travel recovers. In addition, it has created a training course to ensure front-line sales staff comply with guidelines to stay safe when they return to work and ensure the safety of customers at all times. It hopes this will restore customer confidence when visiting duty-free stores.
Under the latest set of restrictions, international travel for leisure and holidays have been suspended with people only allowed to travel for essential work purposes. Bustling airports, which once welcomed thousands of visitors each day, are increasingly becoming more like ghost towns and with no end in sight for when restrictions are likely to lift, the future of the travel retail industry looks bleak.
How can the industry adapt to survive the pandemic?
Many retailers have witnessed strong growth in e‐commerce following a major shift towards online shopping due to the closure of stores. This has presented an opportunity for the industry to rethink the future of travel retail and how it can adapt to deal with the fallout of the crisis as we move towards a new normal in the way we travel and use airports. Especially with airports implementing social distancing safety measures to reduce long queues, even if airport stores were to reopen, would travellers still choose to spend as much time as they did before in duty free stores?
Another blow to the industry came after the UK Government announced a new rule to prevent non-EU tourists from reclaiming VAT on purchases made in the UK. This is a cause for concern to duty-free retailers already in crisis. Airport Operators Association chief executive Karen Dee said that by removing the concession, the UK Government was “needlessly harming” the revenue of retailers and airports.
Browse before you buy
Many retailers with airport stores have already looked into innovative ways to adapt by launching new digitalised retail experiences. A strong focus could also shift towards the use of mobile apps so consumers can still browse exclusive products and see what’s available in store before they travel. With more focus on hygiene and sanitation, it is thought that, as part of health and safety measures, airport stores will operate a “no touch” policy on items to prevent contamination and the spread of the virus.
Some cosmetics brands are starting to look towards Augmented Reality (AR) methods so consumers can try on items virtually and find the right colour match for their skin tone before purchasing makeup items. QR codes will also be introduced more and more as a way for consumers to engage with brands rather than directly with sales staff. With many retailers moving towards cashless transactions, buy before you travel and click and collect at the airport are likely to become the ways goods are purchased.
The road to recovery could be long and slow if travel retailers don’t adapt to the challenges facing the industry. Could we see the end of airport stores altogether or the end of duty-free shopping as we know it?
Check out the latest article on Singapore’s Changi airport introducing a new way to travel by bringing nature indoors where visitors are transported away from duty-free stores to relax in natural surroundings.
Let us know your thoughts in the comments below.