Travel Retail reached $86bn sales in 2019, an eight-fold growth since the late 80’s. Over the last three decades, its focus has significantly changed from selling ‘cheap booze and fags’ to offering premium experiences. Airports turned themselves into sophisticated shopping malls and Seoul Incheon or Singapore Changi became state of the art examples of bricks-and-mortar retail.

However, not surprisingly, Travel Retail was one of the hardest hit sectors by the pandemic. Sales collapsed by 2/3 last year, and are not expected to reach 2019 levels before the second half of the decade.

Nevertheless, according to M1nd-set, a consultancy, there’s a latent appetite to travel and spend in Travel Retail. More than 60% of international travellers participating in a recent study said they would fly again within the first three months of travel restrictions being lifted. And 40% would visit the airport shop next time they travelled abroad.

As Travel rebounds,
so will Travel Retail.
But what will change?

First of all, some things will not really change. Asia will consolidate its dominance in the Travel Retail landscape. Tax exempt shops in downtown areas or designated zones (such as Hainan Island, south west of Hong Kong) will continue to grow – and increasingly attract the interest of European duty-free operators and global brands.

But some things are expected to change.

Online shopping has been accelerated in domestic markets. And the same consumers who now buy their groceries or clothing online will be the ones flying in a few months’ time. So how will this affect Airport or Airline Travel Retail?

Consumers will be more open to browsing before buying, clicking and collecting at arrival, or trying further solutions that will make their experience more convenient. And in order to achieve that, concerted effort and passenger data exchange between airports, airlines, operators and brands will become ever more critical.

Moreover, in such a high traffic international environment, all stakeholders must ensure the experience is safe, comfortable and reassuring. Contact points will have to be reduced, sampling will need to be reconsidered, and digital should be used more effectively to replace some of the traditional physical touchpoints.

Travel Retail and Drinks: Major Impact but Massive Opportunities

Wine and spirits, which accounted for approximately 17% of sales in 2019, were also severely impacted by the toll of travel restrictions.

According to Diageo, Asia and Middle East Travel Retail net sales were down by 46% during the 2020 fiscal year. Pernod Ricard claimed that Covid-19 ‘halted business’, whilst the Campari Group recorded a 68.9% net sales decline in 2020.

Although recovery is expected, as business travel becomes less prevalent in the future – and as high-frequency high net-worth individuals travel less – super premium products may be particularly impacted, and that will affect the Drinks category. More than ever, and above and beyond price discounts, passengers must be given a stronger reason to shop.

What are the innovation opportunities for Drinks companies in the changed Travel Retail environment?

• Sustainability – Many consumers are aware of the impact travel has on their own carbon footprint. Brands should not only drive sustainable packaging solutions in Travel Retail but, rather, make it their lead channel in promoting sustainability.

• Memorability – Post-pandemic travellers will be seeking for quality of experiences over quantity. Ensure the Travel Retail products reflect that. Develop products and packaging that connect to destinations and memories – and make them special and hard to forget.

• Partnerships – Partner with relevant brands – not only in Travel Retail but also in domestic markets – to bring consumers to you when they travel. Partner in activations, and also in joint product and packaging developments.

• GTR Exclusives / Gifting – These have been an important part of the Travel Retail proposition for some time. But as competition with the domestic online channel grows, it becomes crucial for Brands to offer propositions that consumers cannot get anywhere else. Use the emerging time lag between purchase and delivery to offer more crafted and personalised options.

So – will Travel Retail Rebound?

In a recent article by The Economist, there is an argument for closing of the duty-free loophole as it is seen as unfair to high street retail and non-travellers… However, with or without tax incentives, airports will remain good places to shop: the environment is generally pleasant, and the passengers are ‘captive’ and with plenty of time to spend (despite the growing competition for their attention from wi-fi).

Therefore, Travel Retail remains a strategic channel to reach consumers, in particular from emerging markets, in a premium setting.

However, the pandemic has accelerated trends everywhere in the world, and that includes an increased focus on convenience. This is a unique opportunity for Travel Retail stakeholders to work together and accelerate change – and make the shopping experience much more convenient.

So Travel Retail will take-off. But, just like Travel, it should also provide consumers with propositions and experiences that they will not forget and cannot get anywhere else.

Sources: The Economist, The Drink Business, IWSR, The Spirits Business.

Header Photo by Kiwihug on Unsplash