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Spring 2013
Reaching for the Sky

Aritcle Resources

Chris Burden
Bluwire

L. Brooke Comai
Owner
Climax Jerky

Brett Kelly
Vice President
AIRMALL Maryland, Inc.

John Krumnow
Director, Special Operations
Provenzano Resources, Inc.

Clarence LeJeune
MarketPlace Development

Roderick I. McOwan
SVP, Business Development
Marshall Retail Group

Angela Perry
Assistant Manager, Marketing & Specialty Retail
Philadelphia Marketplace

Rob van Snik
VP Finance and Leasing
Westfield Concession Management

PhillyAirport1-copyWant your successful specialty retail business to take off at the airports? Here’s what you need to know first.

Airports around the world have succeeded at adding the “piece de resistance” to their business model—creating retail and restaurant travel destinations. Over the past decade, shopping center developers with expertise in leasing, marketing and specialty leasing have refined the shopping experience for travelers. The airport industry’s continued growth and engagement of traditional and non-traditional retailers has attracted growing interest from consumers and retailers alike. An important question is how do qualified retailers get into airports and what is the process to lease space?

The airport concessions managers agree, the road to opening a business in an airport takes great confidence in a retail or restaurant concept; a sizeable capital investment to start the business; and the patience to deal with what traditional street retailers might say is a cumbersome process.

Concession management companies and brand operators say the top five things retailers need to know before they open in an airport are the following:

1. Understand the venue and the operational differences: Minority participation requirements; operating hours; best uses/products; and the request-for-proposals process

2. Understand security regulations: Badges for and fingerprinting of all employees, and managing merchandise deliveries

3. Learn how to operate in a smaller retail/restaurant space and become more productive

4. Have patience with the process: Leasing, design reviews and approvals and permitting can take more time and sometimes the process can be political

5. Cost of entry: Capital costs are usually double what a retailer is used to spending on “Main Street,” so be prepared for higher expenses in legal, employee parking and delivery fees.

Venue and operational differences

“It’s like no other retail environment. Airport retail is incidental to travel and you need to understand the customer and the demands of operating 365 days a year,” says Clarence LeJeune, President of Marketplace Philadelphia, the concessions manager at Philadelphia International Airport.  “Christmas is just another day and weather events [such as fog, snow and ice] are like Christmas for us if the airport closes for any period of time.”

Square footages and shapes of stores are different in airports than in malls and most retailers have to pay to rent storage space adding to the cost of doing business. With consistent passenger foot traffic offering enormous exposure, airport rents are generally higher than in malls and are based as a percentage of sales and a minimum guarantee.

Product categories must be appropriate for the travel industry consumer. Items such as carry-on prepared foods, sunglasses, electronics, and local souvenirs are top sellers. “The product(s) or the company must be a sustainable brand,” says Roderick McOwan, SVP Business Development at The Marshall Retail Group, an independent specialty retailer in the casino resort and airport marketplace. McOwan recommends interested parties go to airport conferences and read industry magazines before opening an airport business. “What’s hip and trendy today may not be hip or trendy tomorrow by the time you get a store open in an airport,” he says.

According to John Krumnow, Director of Special Operations at Provenzano Resources, Inc., concessions manager at Denver International Airport, “The sterile security environment is the biggest difference compared to malls. Every employee, whether a clerk or a dishwasher is required to clear TSA security and fingerprinting to receive a badge allowing access to a store or an RMU past the security checkpoint.” This process can be cumbersome and time consuming and make hiring more challenging.

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Brett Kelly, Vice President of AIRMALL Maryland, Inc. at the Baltimore-Washington International Airport says his job is to handle the entire development process from tenant sourcing to leasing and management. AIRMALL USA is the airport concessions manager for Baltimore, Cleveland and Pittsburgh airports. Kelly recommends retailers who are seeking airport concessions best establish their business elsewhere first. “Opportunities at airports are limited and airport concessions developers will more readily respond to a concept that has already proven itself to be successful in a traditional setting,” Kelly says. Compared to street or mall retailers, space is limited in concourses. A typical-sized restaurant on the street is 6,000-10,000 square feet.  That same restaurant in an airport might operate in 1,000-2,500 square feet. “When I came to AIRMALL from General Growth Properties, I was staggered by some of the sales volumes that retailers and restaurateurs were generating in smaller spaces,” Kelly says. This makes merchandising of the store even more challenging.

The process

Generally, once a master concessionaire approves a deal with a retailer or restaurateur, the deal is presented to the airport authority for final approval. If approved, the tenant has several additional design approval hurdles to get through. Ultimately, once a tenant is ready to begin construction, he must manage the construction during limited hours (usually not during the airport’s operating hours). “The process is not for the faint at heart. It’s the major leagues if you can get through all of it,” says LeJeune.

Most concession managers hold public meetings each year in cooperation with the airport authority and interested retailers. During these sessions, retailers and restaurateurs who have expressed interest in opening a store or restaurant in the airport have a chance to have any questions answered before they submit a bid for the space. “If you have the ability to endure all these challenges; operating hours, access to inventory, demand [competition] for space, space limitations, then I don’t think there’s a more dynamic environment for a retailer or restaurateur to be in,” LeJeune says.

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These processes can cause anxiety for traditional retailers who are simply focused on selling their brand. Often retailers who lack airport operating experience and do not want the headaches associated with airport retailing use retail operators skilled in the airport environment to run their stores. As a result, an entirely new business has been born where experienced operators like Marshall Retail Group from Las Vegas, are the licensees for major brands such as Swarovski or Harley Davidson and they operate the business for the brand within the airport.

Factoring in costs

Additionally, the cost of entry into operating at an airport can be onerous. Retailers and restaurateurs must be prepared and have the capital to design a first-rate store. This typically requires an owner or operator to produce 10-15 sets of architectural drawings, mechanical and electrical drawings and in some cases, LEED-certified and class “A” fire rated materials must be used as well.

Airports scrutinize the store design and look for construction materials that can stand up to high traffic. Oftentimes, a retailer produces 3-4 sets of architectural drawings before starting construction. The leasing process for airports is different than mall specialty leasing. “Bids for airport retail spaces are evaluated on many factors including rent, retail experience, product mix, quality store design, Airport Concession Disadvantaged Business Enterprise [ACDBE]/minority participation and financial ability of the retailer to perform,” says Rob van Snik, Vice President Finance and Leasing at Westfield Concession Management.

But if you have what it takes to get through the initial processes, a specialty retail business at an airport can really soar and yield rich dividends.

Beefing Up Expectations

BrookeComai2-copySince the mid-1990s, shopping center developers and consultants like Westfield, Marketplace Development (an affiliate of New England Development), and Provenzano Resources, Inc. have applied their expertise in leasing, marketing and specialty leasing to non-traditional retail environments. They have improved the productivity and profitability for the airport facility and the shopping experience for airport consumers.

If you are a successful local retailer or restaurateur, airports want you. Local products and experiences seem to be part of every concession manager’s strategic merchandising plan. Whether you are in London’s Heathrow International Airport where you can find Harrods’s, a famous London department store or in Baltimore-Washington International Airport where you will find Phillips Famous Seafood restaurant, airports want to create a sense of place for tourists. This way travelers can purchase something with local flavor. The sweet spot in airport retail has been in the successful leasing of one-of-a-kind local and familiar restaurants and products that really give the consumer a taste of the city they have landed in.

One such retailer is Climax Beef Jerky, a producer of beef, salmon, bison, buffalo and elk jerky, the preferred snack of skiers and outdoorsmen. This retailer has multiple locations in Denver International Airport and is expanding to Concourses A and C there. According to its owner, Brooke Comai, “People like the idea of a high protein, low-carb snack. We like the whole RMU concept of being right out with the public because jerky is an impulse buy.”

Comai started Climax Jerky in 1999 in Climax, Colorado working in farmer’s markets and even roadside tent stands.

Outside of her locations at Denver International Airport, she has two other locations at The Outlets of Silverthorne and in downtown Breckenridge. Comai says the largest lesson she has learned by operating at the airport is: “The amount of time it takes to actually get employees working. The badge, fingerprinting process can take a very long time and you need to be prepared to fill in staffing until they are badged.”

“The sales in the airport are definitely right up there as my best locations,” Comai says. “RMU retailing works and it is the best format for selling our kind of product,” she adds.

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Airports’ “Cell-ing” Point

Bluwire2-copyBluwire, a hip electronics store founded by Chris Burden and Maurice Ojeda markets itself as: “Cool Space. Hot Tech. Find Us Where You Fly.” The airport store invites passengers to test, try and buy electronics paraphernalia. Customers can try out ear buds and headphones from stores and kiosks in ten different airports.

Bluwire got its start when the owners began in cellphone street retail. “On the street we struggled with marketing and dedicated a huge amount of time trying to drive traffic into our stores. The airport is the perfect retail environment as the traffic is provided to you. We would much rather focus on products and operations than on the marketing side of the business,” Burden says.

“Airport travelers are the perfect customers,” Burden adds, “They strive to stay connected and are looking to stay entertained. We look at the hierarchy of needs in an airport as water, food then communication—this is where we come in. Whether it’s a charger to power your cell phone or a pair of headphones to pass the time, we are high on the list of what passengers need or desire.”

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Taking Off at Philly

AngelaPerry-copyAngela Perry says she loves wearing multiple hats. At the Philadelphia International Airport, she is Assistant Manager, Marketing and Specialty Leasing for Marketplace Development, and the concessions manager.

Perry began her career in mall marketing after graduating from Temple University with an undergraduate degree in public relations. She held marketing and public relations positions at The Gallery at Market East, King of Prussia and Willow Grove shopping centers before she joined the Philadelphia Marketplace Development airport team in 2008 when she transitioned to specialty leasing and marketing. “Although the marketing and specialty leasing roles are similar and the fundamentals are the same, the airport is a new and challenging venue, which is accompanied by a new set of circumstances and regulations to learn. I like it because I am constantly learning new things,” Perry says.

Shopping centers have been successful combining these two roles. “The combination [of positions] works to the property’s advantage due to the leasing side, which helps to introduce new concepts,” Perry says. “On the marketing side, I get to help create programs and events to promote new businesses that come to fruition.”  In this combined role, Perry collaborates with customer service, secret shopper programs, merchant incentives, promotions and events.

To get rapidly up to speed, Perry has enrolled in the Specialty Leasing Designation Program. “The challenge for me has been learning the ‘Art of Leasing 101’—from the hunt, the dialog, the close, and finding my own pace and style.”  She admits  there is a fine line between finding a good quality tenant versus letting income obligations govern decisions. “My goal is to create an exciting program,” Perry says. Her favorite part of the job is seeing new products and concepts, and canvassing for new businesses.  She adds, “It is exciting to know that you can expose a new operator or concept and have huge success. It makes you realize you are a buyer!”

Duffy C. Weir

Duffy Weir is the former vice president and director of specialty retail and marketing at The Rouse Company of Columbia, MD. Now an independent retail marketing and sponsorship consultant and writer, Weir travels the world searching for what she says "makes marketplaces tick." She can be reached at Duffyllc@comcast.net or 410.252.8885.
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