In the unprecedented drama of the current business climate it is crucial to remember that, as airlines focus on fleet reconfigurations and staffing cuts, the response they make now will radically influence their future performance. The cost-cutting strategies that are crucial today must be complemented by positive strategies focused on driving the customer experience tomorrow.
In our latest webinar (12 May, see details below), AOE’s CEO Kian Gould will be joined by leading travel retail and aviation transformation analyst Vimal Rai, MD TRACE Consulting, to discuss the post-COVID-19 future of airline travel retail – including how to break out of the ‘survival mode’ silo and develop new, stronger strategies for ancillary opportunities.
A changed environment
The transformed future air travel experience severely threatens revenue streams but, through digitalization, airlines have proven tools available to create expanded, personalized ancillary offers to revitalize their revenue streams and re-establish customer confidence.
While video conference options – and CFOs eager to minimize travel budgets – will further reduce business travel, recent research by m1ind-set suggests that only around 65% of passengers will be willing to take an international flight within 3 months of the end of the travel bans, further pressurizing revenue. Not only will they be fewer in number, they will be very different to the passengers we knew from just a few weeks ago.
The travel mindset of the future passenger will be driven by health and hygiene issues from the moment they leave home, demanding a comprehensive response from airlines (and airports) at every point on the passenger journey. Smart distancing and health factors will influence everything from airport shuttles and check-in queues to seat trays and washrooms – re-defining the air travel experience. But those who travel will still offer opportunities to get them to spend – if they are approached in the right way with the right offer.
Airlines can respond by re-defining their ancillaries’ offer. Through digitalization and Omnichannel strategies, they have an opportunity to utilize this unprecedented period of change to revolutionize their ancillary revenue streams and establish a new depth of relationship with their customers.
The customer mindset is in turmoil – but this is on the very specific issue of health. Their minds are not in turmoil when it comes to spending. The scale of the sales opportunity will inevitably be hit both by the reduction in income that has hit many households and the inevitably higher stress of the post-COVID-19 travel will inhibit impulse spending on the journey. However, the consumers have not lost their love of shopping and will still respond to providers who create desirability and relevance and meet their needs.
Right now, those needs are being met by online operators.
The Millennials have barely skipped a beat as even more of their lives, and their spending, shifted to online. Older age groups joined them as the evolution of digital behaviour leapt a generation in just a few weeks. The digital giants are growing strongly, Amazon not only already grew 26% this year it is investing $4b to exploit the consumer’s online habit – and the habit will last well beyond COVID-19.
“With so many businesses forced to close their physical storefronts, more are looking to build their digital presences, and those that already invested in their digital presence are increasingly viewing them as their primary storefronts.”Mark Zuckerberg.
That behavioural shift affects the travel retail ecosystem too. Imagine your last shopping trip to a supermarket. Now imagine how the airport stores will reflect that new reality: lower footfall, social distancing measures, no touching of products, no testing/sampling, no wish to interact with staff etc. It’s not a pretty sight but it actually opens up new opportunities for the airlines.
The Omnichannel option
The evolution of Omnichannel has accelerated rapidly in alignment with customer demands, increasing the pressure on airlines to respond with a digital solution designed around their customer’s needs.
Imagine the passenger’s first post-COVID-19 trip. Under the traditional model, selling them an empty seat alongside or an upgrade might still be viable but the confusion of new processes throughout the journey and the hugely heightened stress makes revenue creation a huge challenge, further exacerbated by reduced load factors.
Imagine, instead, if everything you want is placed on a single digital platform; from services such as parking, baggage, upgrades, F&B pre-order, car hire and hotels to retail brands.
The whole experience is contained within a single digital platform to provide a seamless, highly personalized experience, including instant payment and delivery options as part of a cross-channel content strategy that radically enhances the user experience and supports a stronger relationship across all points of contact. Basically, it’s a one-stop platform for everything – which creates huge advantages not only for the user but also for the airline.
Brand power is crucial in this experience. Firstly, an Omnichannel platform provides customers with the choice of leading brands that they love. Secondly, the airlines themselves can reach out to their customers by developing their own identity as caring and meaningful brands, making them more relevant to their customers and integrating the airline within the customer’s daily lifestyle.
To achieve this, the personalization of the online experience is crucial, providing a powerful new customer experience through highly personalized content, with customized sales and marketing campaigns presented in real-time. Combined with home delivery (a crucial factor), the quality of the platform entices the world’s best brands on-board and enables a huge expansion of choice for the customer.
Making the airline relevant – every day
The precision in communication and targeting develops in line with the customer’s behavior and preferences, ‘learning’ more about them every time they visit the platform. This keeps the offer relevant to them, thus driving conversion, basket size and loyalty.
Basically, the more relevant the airline makes itself to its customers the more opportunities it can realise, reaching far beyond the traditional ancillaries and into almost any product or service category. Instantly, the revenue opportunity is transformed by this Omnichannel approach, shifting from the shackles of a specific travel date to a prolonged window of opportunity. At the customer’s convenience 24/7, it opens the opportunity to fulfill more of the customer’s expectations and needs – and it works even when they are not flying.
New benchmarks are being set by a handful of pioneering airlines (including Singapore Airlines, AirAsia and Lufthansa) where their Omnichannel investment has already taken inflight retail into the digital age. In the webinar, we will highlight the advantages and differences achievable by airlines that develop e-commerce holistically, based on understanding of their customers’ needs and behavior.
“Right from the start when we founded KrisShop, we had a vision to become an Omnichannel retailer. What we are doing now is to quickly adjust to a new reality and pivot to the right sales channel..
For us what is relevant is that our customers are going online. A lot of our customers that are not used to online shopping are now trying it for the first time.
COVID-19 has more or less changed consumer behaviour. It’s probably the most important driver of digitalisation. Online shopping is here to stay. We are preparing for the next online shopping [step], with inflight shopping. It means creating a digital shop while you are flying, bringing the same shopping experience as when you are on the ground.”Chris Pok, CEO, KrisShop Singapore Airlines. (see DFNI report https://www.dfnionline.com/duty-free-views/online-shopping-stay-duty-free-views-ways-retailers-pivot-e-commerce-01-05-2020/)
Remarkably, the airlines that have already evolved to the Omnichannel approach are even to maintain a degree of sales throughout the current grounding of their fleets, as well as sustaining their customer relationships. They have also used the time to further improve their logistics systems and even expanded their platforms to address customer needs during lockdown through new concept stores.
Future opportunities and strategies
The webinar will also examine a series of current issues affecting airline revenue strategies for the post-COVID-19 market, including the F&B opportunity. Research suggests that F&B will be a major concern for passengers, including an unwillingness to use sit-down restaurants at airport F&B locations (80% will avoid or reduce their use) – this leads to new thoughts on how the F&B experience will look in the future, both at the airport and inflight.
“In times of economic downturn, the right thing to do is keep investing in building the future.”Mark Zuckerberg.
In the year ahead it will be more difficult than ever for airlines to drive revenue through core products such as fares and upgrades but the current downtime can be utilized, with minimised capital expenditure, to quickly and effectively develop an Omnichannel strategy.
From looking at passenger needs and behavior from different perspectives behavior to retail brands and F&B pre-ordering, the webinar will share how digitalization can create opportunities to stimulate ancillary revenues in the post-COVID-19 travel world.
Please do join us to examine the issues and questions that will influence the future of airline ancillary revenue and drive performance in the world of post-COVID-19 travel.
On 12th May, we’ll discuss how airlines can develop new strategies for ancillary revenue growth through travel retail, inflight-shopping and F&B pre-order.
- Hosted by Kian Gould, Founder & CEO, AOE
- Speaker: Vimal Kumar Rai, MD, TRACE Consulting
To ensure everyone around the world can attend this webinar, it will be hosted two times: at 10:00am (CET) for the Asia region and at 04:00pm (CET) for Europe & the USA.