Indian Airports Up For Retail Therapy

by Tanya Krishna

06-August-2019  |  15 mins read

Airport retail story really took off in India post the multi-billion dollar upgrades
Airport retail story really took off in India post the multi-billion-dollar upgrades.

Airports around the world have witnessed a kind of retail boom and retailers are not leaving any opportunity to cash in on this potential market and to make passengers spend more time and money at the duty-free outlets. With the increasing number of air passengers every year in India and an obvious scarcity of quality retail space being faced by many domestic as well as international retailers across metros, airports are emerging as the next battleground for retailers across the country. Following in the footsteps of major transit points internationally, the two major airports of India – Delhi and Mumbai – are now offering a good tenant mix while other airports are slowly catching up. India’s largest duty-free retail space at Indira Gandhi International Airport (IGIA) in Delhi has over 1,000 brands and more than 43,000 products and it leads in annual retail sales worth of Rs.400 crore. The Airports Authority of India (AAI) has undertaken the development and modernisation of metro and non-metro airports in an endeavour to develop modern infrastructure and to enhance the non-aeronautical revenue.

While this lucrative retail space comprises an expansive range of brands, the struggle to find the right kind of area is real. A promising sector for retail development, airports today are looking at majority of premium brands keen to grab a pie of this opportunity, and in turn, make them glamorous than ever. Sanjay Roy, Executive Director, Puma India, asserts, “Over the last 5 years, airport retail has been seeing an upward trend in India. A lucrative retail hub, the privatisation of airports has allowed more brands to leverage the opportunity to access a highly segmented audience. Travel retail in India is growing at a fast rate with local and international brands eyeing for a retail presence across key airports. This trend will only continue to accelerate over the coming years.”

An industry taking off with time

With retailers already saturating the malls and high streets of the world, airports remain the best resort for a retail brand to stand out of the crowd; this is the way forward for retailers around the world and not just in India. In fact, many retailers also claim to have their best performing outlets at airports. While the space crunch is one factor, what really is taking this industry upwards? Retail environment at airports offer an idyllic platform where customers can make impulse purchases on a whim as these outlets provide them with a shopping experience equivalent to or sometimes better than the other traditional retail formats, giving a needed push to this trend. “Over the last decade, we have witnessed a spurt of travel which has now become synonymous to work, experience and an essential way of living. This has brought about a growth in airport retail industry in India. While waiting for a flight or a stopover or layover, the preferential purchasing pattern has always been fashion, accessories and food, with the high-ticket products being watches, perfumes and apparel. Hyper connectivity is one of the main factors behind this profound growth seen in airport retail. The connectivity of Tier-2 and Tier-3 cities to international destinations has increased the potential of airport retail in these areas as well, which were once considered to be nominal. Our stores at the Vizag, Nagpur and Pune airports indicate this shift in trend,” informs Kamal Khushlani, Founder & Managing Director, Mufti.

Mumbai’s Terminal 2 has an annual footfall of 45 million passengers and Delhi’s IGI Airport handles close to 55 million passengers annually. Today’s millennial generation does not only travel further and more frequently, but also explores the world deeper, and as a result, is more informed and conscious of reputed brands even while doing impulsive shopping. Sunil Kumar Sharma, Regional Manager, Madame, agrees on this as he maintains, “Mass volume of potential customers with increasing air travel day by day and lead time before flight boarding are the key enablers converting airport zones into good retail hubs. Passengers, with increased disposable incomes, are deliberately utilising their time by meeting their shopping requirements.” From vacationers to business travellers, airports provide brands an opportunity to engage a large captive consumer base under one roof. Additionally, infrastructure has significantly improved over the last few years which has made airports to be now known for their shopping lounges, attracting consumers with high disposable income. However, Harkirat Singh, Managing Director, Woodland Worldwide, believes that stores at airports mostly ‘serve the branding purpose for a brand rather than conversions or sales’.

What really works at airports?

Airport retail story really took off in India post the multi-billion dollar upgrades and while airport retailing has its perks, like every retail scenario that exists in the world, this too works on consumer preferences and on differentiating factors of the brands present in the airports. Sanjay affirms, “Customer experience is extremely important at airport retail outlets and since the customers are very short on time, the service standards need to be extremely high, catering to buying decisions that are made in 10 minutes or less. Also, since the space is limited, product display options need to be optimised compared to a regular store where space is often never a constraint. In terms of category, we see jackets, polos and T-shirts selling more at our airport outlets and so we focus on these categories mainly.” With flying through different time zones already being a challenge accompanied by a lot of walking that is required at any airport to reach respective terminals, passing through a number of security checks, retailers ensure to offer what’s relaxing, comfortable and lightweight. Harkirat agrees, on this as he asserts,“Normally what we have noticed is that our range which are more comfortable and lightweight go off the rack pretty soon, whether they are shoes or garments. Nobody will prefer buying a specialised product at an airport store as they require alterations and services and are not an impulsive purchase. Our bestselling products at our airport stores include overall jackets, lightweight windcheaters and other multipurpose kind of products.” While functionality is one factor for merchandise selection at airports, Mufti works with the trends and has launched its Fight Edition, which is an exclusive sport-inspired collection that makes one look trendier and yet comfortable at the same time. “Mufti’s Flight Edition works very well at the airports. Our joggers, hoodies and sweatshirts are comfortable as well as trendy and stylish. Our lab shirts can easily go from day to night, making for a perfect buy at our airport outlets,” informs Kamal.

Mufti

Besides product assortment, the size of the outlets at the airports also plays a decisive role in assessing the success of a brand in these locations. The average store size of Puma stores at airports is 400-500 sq.ft. with innovative display of products. The brand also works in kiosks format to cash in on fast moving items and impulse buyers. Sunil adds, “Exclusive store formats and pop-up stores work best for Madame at the airports. We prefer small or mid-sized exclusive stores with specific lines. We are also opting for shop-in-shops at few airport locations with our LFR partners.” A retail brand takes care of a lot of intricacies and details in order to optimise on RoI. These and many other measures are undertaken to draw the attention of the plethora of consumers the airports offer on a daily basis who give these retail outlets their undistracted attention thereby garnering sales. The average ticket size at a Madame store is Rs.2,875, while for sportswear brands Puma and Woodland, it ranges between Rs.4,000-Rs.5,000 and above.

Madame

A smooth runway or not

Today, airport retailing offers business opportunity that no retailer can ignore. Advantages like all-year round heavy footfalls along with high returns for brands play a major role in turning this format into a big hit. From a retailer’s end, there are many advantages of an airport store including good, consecutive and constant footfall; stock movement and fresh display placement of products as they move faster than the normal markets; the exposure brands get at the airports, which also invites maximum eyeballs to the store; and lastly, the store opening time span at airports is much more than the normal markets, thereby definitely increasing the sale. Sanjay explains, “Due to limited space at airports, very selective brands are available during a given time, thereby offering a much higher mindshare compared to a regular shopping mall. The audience at the airports is highly segmented and usually has higher spending capacity.” In addition, continuous growth in passenger traffic banks such positive expectations. As pointed out by Harkirat, having stores at the airports also serve as a medium of marketing and help in building brand awareness and imagery which proves beneficial for the brand in the long run. But the question still remains, ‘Is this trend sustainable in the long run?’ “Airports have been reconfigured to essentially force consumers to walk directly through concessions on their path through the airport. Rental costs play a very important role along with size and location availability, which has the maximum footfall. If airport retail continues to develop at the breakneck pace it’s currently keeping, airport shopping corridors may become tourist destinations in their own right,” Kamal avers. It is worth mentioning in this context that according to the Centre for Asia-Pacific Aviation (CAPA) estimates, the duty-free spent at Indian airports will reach US $ 1.6 billion by 2021 – an eight-fold increase.

Puma

Glitches and the way forward…

A great opportunity indeed, airport retailing is sought by many but space constraint and other procedural steps by the airport authority make accessibility a bit difficult. Few initial challenges include awareness about the process and the time of the bidding which requires rather close follow-ups. Sunil Kumar Sharma further adds, “Major challenges include the struggle to find a good location, desired store size, typical commercial terms at the airports, high investment and the security process, which specifically causes delays and hurdles in the path to expansion and growth.” Another major challenge for the airport retailers is stock replenishment. While Woodland replenishes its stocks every evening and keeps some buffers for its core sizes and colours at the airports similar to Puma which has a stock point inside the airport for replenishment every week, Mufti restocks its merchandise every 15 days and Madame replenishes twice a week to optimise the retail space. Furthermore, rising rentals, exuberant advertising prices and high staff costs at the airport outlets also make the store unviable if sales are not up to the mark. Another drawback is the time limit as tenders for this domain are just valid for one year and need renewal every year. Also, seasonal crests and troughs in footfall depending on the demand for air travel make it harder to predict steady revenue for year-round sustenance.

But as they say, all great things come with challenges and risks. Even as there are considerable amount of challenges, one cannot let go off such a bristling retail opportunity. Individuality and differentiation go a long way in gaining maximum returns from these high-prices outlets; brands have now realised how imperative is the airport retailing industry today. Considering that out of 42 international airports in India, duty-free zones exist in 17—four private ones and 13 under the Airport Authority of India (AAI)—there is immense scope for duty-free retail to grow.

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