Written by Marisa Garcia – Flightchic.com
Mobile e-commerce tools may offer fresh opportunities to revive in-flight retail and leave the tired push-cart retail model behind.
Speaking at IATA Wings of Change Europe in Madrid, Kian Gould, Founder & CEO, AOE, highlighted a missing digital link between the old in-flight retail model and current consumer e-commerce shopping habits which discourages sales of high-revenue, luxury products.
One of the advantages that airlines have over traditional e-commerce retailers and over airports themselves, Gould argued, is a rich base of customer data that can support greater personalization of offers. Airlines also have contact with the customer from the point of flight search to the journey and the return home, which allows them a large time window to make offers and entice retail purchases.
“There is a danger for the travel-retail space and also the aviation space which in part still relies on margins from selling onboard and doing e-commerce with passengers, where passengers will increasingly decline to buy from an airport or an airline,” Gould said. “We can already see those trends significantly when we are looking at the space. The ones that have been hit the hardest in this space have been the airlines with 11% CAGR industry decline of travel retail sales over a period of five years.
“This might be the reason why some airlines have already given up on this business model altogether and decided they will no longer sell any retail products. However, the big question is whether this is really the right decision.
“The average passenger, who will only spend about $8 while traveling, will spend $540 online and more than $6000 in retail a year. And, we, as the aviation community, know much more about these passengers than most e-commerce providers in the world actually do.”
Gould said that mobile must be part of the retail process because consumer habits already point to mobile as a preferred method for interaction and transaction.
- The average European spends four hours on the mobile phone.
- 25% of all e-commerce sales in the US are now coming from mobile devices.
- In China, 75% of all e-commerce sales come from mobile devices.
“The percentage of passengers using their mobile devices to book and to check-in is growing exponentially, and that shows what we are occupied with when we are traveling is our mobile device—not what is around us,” Gould said. “Airlines are far from really capitalizing on the opportunity that creates.”
It is also important to get digital offers before consumers early because consumers are less likely today to make impulse purchases at retail outlets.
- 81% of all purchases are planned in advance
“People do their research digitally and online before purchasing something and they react much more to digital impulses that to physical impulses when deciding what product to buy,” Gould said.
- 34% of all passengers are actually looking for duty-free shopping possibilities before traveling
- 40% would like to do the shopping before flying
- 53% make the decision to buy duty-free before traveling
- 79% of all of our purchasing decisions are influenced by online search at one stage or another.
Heathrow Digital Retail
AOE has worked with Heathrow Airport to deploy digital retail tools and improve sales, especially of luxury goods.
“Airlines are in a better position to communicate with customers pre-flight than the airport, which doesn’t own the customer data, to be able to do personalization and recommendations; to actually sell to your customers before they are traveling and not in that very constrained time while they are traveling,” Gould said.
At Heathrow, digital retailing has boosted sales of high-end goods, something airlines should consider when designing their own digital retail outlets.
- 56% of the sales are high-end electronics—a lot is luxury watches
- 24% is luxury fashion
- The top selling item is a €35,000 watch on the e-commerce platform
- The top selling brand is Bulgari
“This is also one of the explanations we have found for why the simple reserve and collect or pre-ordering for the airlines doesn’t really work for the products that they offer in-flight—the standard duty-free product—because the interest to pre-order those is relatively limited,” Gould said. “Pre-ordering products that are much more rare and harder to get, and where the price advantages is higher, is much more interesting for the passenger.
“But it is much harder for an airline to carry that in a cart, if they don’t know that they are going to deliver it. Pre-ordering, versus in-flight delivery, is a key benefit of digitalization and e-commerce for airlines.”
Gould said airlines can become e-commerce leaders themselves, or collaborate with their hub airports to boost sales for shared revenue.
“No one can provide the all of the relevant touch-points for the customer. The airports have the infrastructure but they don’t have the data. The airlines have the data but they don’t have access to the product. The brands don’t have access to the passenger directly,” Gould said. “Really, what we call the fraternity of travel retail is what can drive this forward.”
“Digital won’t replace physical travel retail but we believe very strongly that’s where most of the future growth lies,” Gould added. “In five years’ time there will be two kinds of airlines: the ones who are great at omni-channel commerce and building significant revenue streams from them, and there will be others who decide to use that data to collaborate with their hub airports and work on a collaboration model to actually drive sales at the airport. Either way is fine, but it’s about the digital drive to sell the right products to the right customers at the right time.”