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Fall 2009 Airport Specialty Retail: A Changed Landscape

Well before the recession officially kicked in—as consumers chose to vacation close to home as a less expensive option to flying to tourist destinations—the term “staycation” became a part of the American vocabulary. Despite some of the lowest airfares in years, consumers and business travelers decreased their travel spending. It’s not all dismal though: The Federal Aviation Administration recently forecast that, following a near-term decline, there would be a “return to growth over the long term.”

Effect of the economy

Kevin Kern, owner of Kevin Kern Consulting, a company that does consulting work in airport specialty retail observes that traffic varies widely depending on location—for example, traffic at Atlanta’s Hartsfield International Airport is up 1%, but Las Vegas International Airport is off 30%.

You would think that decreased traffic would mean lower sales registering at airport specialty retail locations. Not so, says Kern. “Naturally, fewer travelers mean fewer potential customers, but overall, the airport retailers have experienced a smaller drop in sales than retailers in
traditional venues,” he says.

Westfield’s Concession Management Division—which oversees airport retail in Boston, New York, Newark, Washington, D.C., Orlando and Miami—reports that while traffic is lower in some airports, the overall numbers are still strong. Iris Messina, senior leasing manager at the company, agrees that air travel is still strong, with business and leisure travelers finding a lot of good bargains at airport specialty retail locations.

Paula Kucharz, business development manager at the Phoenix Arizona Sky Harbor International Airport sees something different. She advises that while food and newsstands have reported stable sales, it’s the specialty retailers at their location that have been “hit the hardest.”

Airport Retail 101

Airport shoppers’ habits are different. “Generally speaking, people check their guilt [about shopping] at the door and end up buying totally different things—such as magazines, calorie-laden coffee drinks and T-shirts—than they do at home in a mall,” Kucharz says.

Merchandise well suited for airports ranges from souvenirs, to trendy gadgets and electronics. Products that can fit easily into carry-on luggage or products that fill an immediate need or replace a forgotten item (such as sunglasses or cell phone chargers) are a good fit. Travelers also shop for souvenirs from the destinations they visit.

Airport specialty retail now

The Department of Homeland Security’s ban on liquids, which was implemented in 2006, affected airports initially. Now, says Kucharz, the “salsas and lotions” are back. But the department continues to play a huge role at all airports and retailers must comply with the badge requirements for employees and the inspection processes that need to be instituted.

High-tech and self-service kiosks have done well in the airport specialty retail landscape. For example, ZoomShops, which are essentially hybrid vending machines, continue to fare well. ZoomShops operates multiple locations in 19 U.S. airports, and has over 300 kiosks in malls and retail stores across the U.S. and the world. The vending machine sells well-known brand products in a 28-square-foot kiosk and can produce $4,000 to $40,000 per square foot annually.

At Denver International Airport, ZOOX Systems offers high-speed Internet, PC gaming and office services to customers with idle wait time between flights. This freestanding common area kiosk “caters to passengers who would rather sit down and tackle a full inbox much more efficiently than they can with a handheld PDA,” says Cheryl Madeson, marketing manager at KIOSK Information Systems, the Louisville, CO-based parent company.
Products that meet the needs of the business traveler remain popular. Matt Phor, national sales director for Rosetta Stone, says that customers are learning languages to stay competitive in the marketplace and this is where Rosetta Stone comes in. The company’s 11 airport locations give employees the chance to fully demonstrate the products—and business has done well.

Another product for the business traveler is Neat Company’s integrated hardware and software systems, which capture and organize key information (like business receipts) so customers can manage, share, and securely store it.

Top performing merchants at Westfield locations include: Panama Jack, which sells authentic brand unisex clothing and hats along with Sweet Treats, a gourmet prepackaged confection purveyor. Westfield’s retail merchandising program focuses more on retail merchandise and less on service uses.

Currently, the top performing merchants at the Philadelphia Airport include InvisibleShield, a protective shield that covers all electronic devices such as PDAs and cell phones. Magic Pens, the colored markers, have also made a comeback. Sonia Del Rosario, specialty leasing manager at Philadelphia Marketplace, the third party manager for the Philadelphia International Airport, says the markers are very attractive to passengers with young children.

Messina and Rosario attract new retailers to their programs through networking and educating existing merchants. They travel to trade shows, shopping centers and craft markets. Because of the minority business requirements enforced by government entities overseeing airports, most specialty leasing managers also network with minority business groups to identify new retail entrepreneurs.

Back to the basics

With fewer travelers at airports than in past years, airports and concession retailers are especially focused on getting the most from every customer.

Providing superior customer service; improved visual merchandising and focusing on passengers who are stopping at carts are keys to closing each sale says Rosario. She manages and leases a large collection of retail merchandising units—including 28 RMUs, four shoeshine operations and seven”Philly Pretzel” food carts.

Kenneth Buckner, senior marketing manager at Westfield Concessions Management, says the essential principles of retailing work in airport specialty retail too. He notes that RMU sales have remained stable and attributes this to the extensive customer service programs Westfield provides to all retailers.

“Our philosophy is that customer service is about making customers happy and when they are satisfied, they [the customer] will spend more,” Buckner says.

With air travel bargains ripe for picking this fall, there’s reason to expect airport specialty retail will continue to fly high.

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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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