It’s a familiar scene: the trolley makes its way down the aisle, pushed by a flight attendant. “Duty free? Fragrances… spirits… gifts…” Passengers continue to look at their screens, read their newspapers or snooze as the trolley rattles slowly past. One or two may take a brief look at the shopping catalogue lodged in the seatback in front of them.
This is onboard retail in action for most of the world’s airlines. According to a survey, only one in ten passengers made inflight purchases in 2015. The truth is that many of those passengers ignoring the duty free trolley will already have purchased products at the airport: that’s where more than half of travel retail sales take place, while airlines can muster less than 5%.
The airline turns retailer
Yet as margins on seat revenues sink ever lower in a world of increased competition, the higher margins offered by retail are increasingly attractive to airlines on the hunt for ancillary revenue. And now, with the advent of fast, seamless onboard Wi-Fi, the possibilities are there to make the most of what must be the ultimate captive market. As the CEO of one travel retail solution provider puts it, “Airlines will have to reinvent themselves as retailers. They could learn a lot from retail chains like WalMart and Tesco, especially when it comes to offering the right product to the right customer at the right time.”
In today’s connected world, online retail has become an everyday experience for the majority of people, and the numbers are growing rapidly. According to eMarketer, global ecommerce sales will total almost two trillion dollars this year, and that figure is set to double by 2020. No wonder airlines are working on ways to get a slice of the cake.
Amazon steps up
One early scheme saw an American operator do a deal with Amazon, offering passengers free access to its site on what is normally a paid for Wi-Fi service, and receiving a commission on any sales. Amazon’s interest was a clear marker of the potential it sees for shopping in the air.
But what’s in it for the airlines? For a start, passengers’ access to the traditional fare of duty free products and food and beverages becomes much easier. There’s no need to wait for that trolley to come rolling down the aisle, just order and pay for whatever you want whenever you want to. And evidence shows that aircraft offering self-service shopping see a three-to-fivefold increase in the number of onboard duty free sales. There are further benefits for passengers, too: inflight connectivity means items can be ordered for delivery to their home or destination during a flight.
One European carrier recently announced a scheme allowing passengers to surprise friends or family with a gift during a flight. Via the online shop, they can purchase an item such as a glass of champagne or a bottle of perfume that is then delivered gift-wrapped to the recipient by a member of cabin crew.
On an airplane, you have a captive market, and with sophisticated technology, you can sell to passengers in very personal ways.
The growth of so-called ‘big data’ also allows opportunities to personalise passengers’ shopping experiences. This means, for instance, that airlines can analyse frequent fliers’ shopping habits and then stock specific products on their forthcoming flights based on their preferences. And those products will go far beyond what’s on offer in the traditional duty free catalogue, to include destination-focused items, such as hotel packages, sports and concert tickets, restaurant and theatre reservations, and of course further flights.
As the New York Times put it, “On an airplane, you have a captive market, and with sophisticated technology, you can sell to passengers in very personal ways.”
Finally, if we were to do a little crystal ball gazing. It could be that the duty free product inventory opens up to higher ticket price items, such as a car or high value jewellery and watches. Thanks to inflight Wi-Fi, charge cards can be processed in real-time, which means more expensive items can safely be sold.
Perhaps one day, not too long from now, passengers will take short-haul flights simply in order to buy a pricey item tax-free. A new retail revolution could be upon us sooner than we think.