definition of retail travel

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Travel Retail

What is travel retail.

Travel retail is a term that describes retail outlets that sell products to end consumers in a travel environment.

Some of these shops are duty free, where customers are exempted from certain local taxes and duties, and in this case shops usually require proof of travel, such as a boarding pass, to complete the transaction.

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Travel retail is a major source of revenue for airports, and provides a great sales channel and branding opportunity for consumer brands, as there are billions of international travelers that pass through airports each year. That’s why it is one of the main distribution channels in the beauty industry.

In some countries, certain types of products are not sold freely inside the country but are available at duty-free shops, such as alcoholic beverages, which drives the sales of these products upon arrival at these airports.

The market size of this segment has been steadily growing over the last few years, and is expected to reach $156.3 billion dollars by 2030, with a CAGR of 10.7% between 2023 to 2030.

Types of Travel Retail

• Airport shops
• Border shops
• Cruise & ferry shops
• Some shops at international railway stations
• Shopping onboard an aircraft
• Certain downtown stores that require proof of travel

Product Categories

The most common product categories include:

• Perfume & Cosmetics
• Confectionery
• Food & Beverage
• Electronics
• Accessories (Bags, watches, eyewear,..etc)

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What Is Travel Retail? A Comprehensive Guide

What Is Travel Retail?

Have you ever wondered why duty-free shops are so common in airports and other travel hubs? Or why some products seem to be so much cheaper when you buy them at the airport? If so, you’re not alone. Travel retail is a multi-billion dollar industry, and it’s growing rapidly. But what exactly is travel retail, and how does it work?

In this article, we’ll take a closer look at travel retail. We’ll discuss what it is, how it works, and why it’s so important to the global economy. We’ll also explore some of the challenges facing the travel retail industry today.

So, what is travel retail? Simply put, travel retail is the sale of goods to travelers. This can happen in a variety of settings, including airports, train stations, cruise ships, and border crossings. Travel retail is a global industry, and it’s estimated to be worth over \$50 billion per year.

Travel retail is important for a number of reasons. First, it helps to generate revenue for airports and other travel hubs. Second, it provides travelers with a convenient way to buy goods that they might not be able to find at home. Third, it helps to promote tourism.

However, the travel retail industry is facing a number of challenges today. These include rising costs, increased competition, and changing consumer preferences. Despite these challenges, the travel retail industry is still growing, and it’s expected to continue to grow in the years to come.

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What is Travel Retail?

Travel retail is the sale of goods to travelers in airports, seaports, train stations, and other points of departure and arrival. It is a global industry that generates billions of dollars in revenue each year.

Travel retail offers a unique shopping experience for travelers, who can find a wide variety of products that they may not be able to find at home. It also provides a convenient way for travelers to buy gifts for friends and family back home.

The travel retail industry is constantly evolving, as new technologies and trends emerge. In recent years, there has been a growing focus on sustainability and ethical sourcing. Travel retailers are also looking for new ways to engage with travelers and create memorable experiences.

History of Travel Retail

The history of travel retail can be traced back to the early days of commercial air travel. In the 1920s, airlines began selling duty-free goods to passengers on long-haul flights. This was done to offset the high cost of fuel and to make air travel more appealing to passengers.

Duty-free shopping quickly became a popular amenity for air travelers, and it soon spread to other modes of transportation, such as cruise ships and trains. In the 1960s, the first duty-free shops opened at airports. These shops offered a wider variety of products than the duty-free shops on airplanes, and they quickly became a popular destination for travelers.

In the 1970s, the travel retail industry began to grow rapidly. This was due to a number of factors, including the increase in air travel, the growth of the global economy, and the rise of tourism. By the end of the 1970s, the travel retail industry was a multi-billion dollar business.

The travel retail industry continued to grow in the 1980s and 1990s. This was due to the continued growth of air travel, the expansion of duty-free shopping into new markets, and the development of new technologies. By the end of the 1990s, the travel retail industry was a global phenomenon.

The travel retail industry has continued to grow in the 21st century. This is due to the continued growth of air travel, the expansion of duty-free shopping into new markets, and the development of new technologies. The travel retail industry is now a major part of the global economy.

Types of Travel Retail

There are a number of different types of travel retail outlets. These include:

• Airport duty-free shops: These shops are located in airports and sell a wide variety of duty-free goods, including alcohol, tobacco, perfume, cosmetics, and souvenirs.
• Border shops: These shops are located near international borders and sell a wide variety of duty-free goods, including alcohol, tobacco, perfume, cosmetics, and souvenirs.
• Train station shops: These shops are located in train stations and sell a wide variety of duty-free goods, including alcohol, tobacco, perfume, cosmetics, and souvenirs.
• Cruise ship shops: These shops are located on cruise ships and sell a wide variety of duty-free goods, including alcohol, tobacco, perfume, cosmetics, and souvenirs.
• Other travel retail outlets: These shops are located in other places where travelers gather, such as hotels, casinos, and tourist attractions. They sell a wide variety of duty-free goods, including alcohol, tobacco, perfume, cosmetics, and souvenirs.

The different types of travel retail outlets offer a variety of shopping experiences for travelers. Airport duty-free shops are typically large and offer a wide variety of products. Border shops are typically smaller and offer a more limited selection of products. Train station shops are typically located in high-traffic areas and offer a variety of convenience items. Cruise ship shops are typically located near the ship’s casino and offer a wide variety of luxury items. Other travel retail outlets offer a variety of shopping experiences, depending on the location and the type of products that are sold.

Travel retail is a global industry that offers a unique shopping experience for travelers. It is a major part of the global economy and is constantly evolving to meet the needs of travelers.

Benefits of Travel Retail

Travel retail offers a number of benefits to both retailers and consumers. For retailers, travel retail provides an opportunity to reach a wider customer base and generate additional sales. In addition, travel retail can be a more profitable channel than traditional retail, as retailers are able to charge higher prices for products due to the lack of competition.

For consumers, travel retail offers a number of benefits as well. First, travel retail provides access to a wider range of products than is typically available in traditional retail stores. This is because travel retailers are able to source products from a variety of countries and regions, which can give consumers the opportunity to find products that they would not be able to find otherwise. Second, travel retail can offer lower prices than traditional retail stores, as retailers are able to pass on some of the savings they earn from duty-free shopping to their customers. Finally, travel retail can offer a more convenient shopping experience than traditional retail stores, as consumers can often find travel retail stores located in airports and other transportation hubs.

In addition to the benefits listed above, travel retail can also provide a number of other benefits to both retailers and consumers. For retailers, travel retail can help to increase brand awareness and loyalty, as well as generate positive word-of-mouth advertising. For consumers, travel retail can provide a more enjoyable shopping experience, as well as the opportunity to find unique and hard-to-find products.

Challenges of Travel Retail

While travel retail offers a number of benefits, there are also a number of challenges associated with this channel. One of the biggest challenges is the high cost of doing business in travel retail. This is due to the fact that travel retailers typically have to pay rent and other fees that are much higher than those charged by traditional retail stores. In addition, travel retailers often have to deal with high levels of theft and fraud, which can further increase their costs.

Another challenge of travel retail is the fact that it is a seasonal business. This is because travel retail sales are typically highest during peak travel times, such as the summer and winter holidays. During off-peak times, travel retailers can experience significant drops in sales. This can make it difficult for travel retailers to maintain a consistent level of profitability.

Finally, travel retail can be a challenging channel to manage due to the fact that it is often subject to a variety of regulations and restrictions. These regulations can vary from country to country, and can make it difficult for travel retailers to operate in a consistent and efficient manner.

Despite the challenges, travel retail can be a profitable and successful channel for retailers and consumers. By understanding the benefits and challenges of travel retail, retailers can make informed decisions about whether or not this channel is right for them.

Travel retail is a growing industry that offers a number of benefits to both retailers and consumers. By understanding the benefits and challenges of travel retail, retailers can make informed decisions about whether or not this channel is right for them.

What is travel retail?

Travel retail is the sale of duty-free and other goods to travelers in airports, seaports, train stations, and other points of departure and arrival. It is a global industry that generates billions of dollars in revenue each year.

Why is travel retail so popular?

There are a few reasons why travel retail is so popular. First, travelers often have extra money to spend when they are on vacation. Second, travel retail stores offer a wide variety of products that travelers may not be able to find at home. Third, travel retail stores often offer duty-free prices, which can save travelers a lot of money.

What are some of the challenges facing the travel retail industry?

The travel retail industry faces a number of challenges, including:

• The growth of e-commerce
• The rising cost of travel
• The increasing security measures at airports and other points of departure and arrival

What is the future of travel retail?

The future of travel retail is uncertain. However, there are a number of factors that suggest that the industry will continue to grow in the coming years. These factors include:

• The continued growth of international travel
• The increasing demand for luxury goods
• The development of new technologies that will make it easier for travelers to shop

How can I get involved in the travel retail industry?

There are a number of ways to get involved in the travel retail industry. You can:

• Work for a travel retail company
• Start your own travel retail business
• Become a travel retail consultant
• Attend travel retail trade shows

Additional resources

• [The International Duty Free Association](https://www.idfa.aero/)
• [The Travel Retail Business](https://www.travelretailbusiness.com/)

For consumers, travel retail offers a convenient and affordable way to purchase a wide range of products, from luxury goods to everyday essentials. In addition, travel retail can often be a more tax-efficient way to shop than at home. For businesses, travel retail provides a valuable opportunity to reach new customers and grow their sales. By understanding the needs of the traveling consumer, businesses can develop strategies to reach this lucrative market.

As the travel industry continues to grow, so too will the travel retail industry. By understanding the unique challenges and opportunities of this industry, businesses can position themselves to succeed in the years to come.

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A Guide on Travel Retail: Definition, Growth Factors, and Future Prospects

Travel retail industry is one of the major subsidiary yet standalone industries of the travel and tourism sector. Since the last few years, barring the pandemic period, this industry has seen a substantial rise in terms of its growth number. Though one of the obvious reasons behind the growth in travel retail industry is the growth in number of travelers, there are certain growth factors which are characteristic to the travel retail industry itself.

In the 1700s, there was a shift from primary economic activities like agriculture, mining, etc. to secondary sector constituting manufacturing, construction, etc. This shift was primarily facilitated by the Industrial Revolution which was kickstarted in the Great Britain. Consequently, on similar lines, the ICT revolution enabled a shift from secondary to tertiary sector which predominantly constituted of service-oriented economic activities. One of the biggest industries that emerged out of the tertiary sector was the travel and tourism industry.

What is Travel Retail and Why is it on the Rise Since the Last Few Years?

In the last few decades, especially after the opening of majority of the global economies post-1991, travel and tourism industry has grown like anything else. Some economists even consider it to be a separate economic sector altogether. On account of this growth, several subsidiary and standalone industries have propped up and thrived under the travel and tourism sector. One such standalone industry is the global travel retail industry. Travel retail pertains to creating, planning, and providing travel services, while at the same time, engaging in sales activities to cater to the shoppers’ demands while they are in transit.

The growth in the travel retail market is mainly attributed to four main factors which are discussed below:

• Boom in the Travel Industry on the Whole

Except the aberration witnessed in the last two years due to the Covid-19 pandemic, there has been a steady growth in the number of people travelling across the globe. Though the reasons for travel might be different for each individual, the travel retail industry has been able to fulfill their varied demands efficiently. Hence, a growth in the travel industry has been mirrored by the travel retail industry. Also, since people have been exploring countries and places that were previously not so often visited, the travel retail industry has found new ways and avenues to offer their services.

• Travelers Tend to Shop More

Studies by various behavioral economists have shown that travelers, especially the ones going out for vacations, tend to shop more. This shift from a thrift behavior, according to these experts, is due to the leisurely atmosphere and stress-free state of mind. Also, since travelers have a lot of free time at their disposal, they can shop for longer periods of time. Another interesting theory as to why people spend more at transit channels, such as airports , is that the infrastructure inside airports is built on the concept of open-plan setups. As a result, luxury shopping and casual shopping spaces are intertwined in each other, thus blurring the lines between the two.

• Accurate Data Insights

The retailers engaging in travel retail and sales activities have an added advantage of accurate information about their customers. Their travel and departure times, the type of aircrafts they are travelling, their destination, etc. helps the retailer in getting a brief idea as to what the traveler might be looking for. This helps these retailers to plan their sale strategy accordingly, which helps in maximizing their profits. Also, providing customer service to the passengers or people in transit becomes much easier due to these vital data points.

• Better Showcasing of Products

Since travelers tend to shop more products and spend more on luxury items during their travel, they tend to appreciate certain products more than in normal circumstances. This provides the companies and travel retailers to showcase their products and test whether the products are sellable. Hence, various international brands of different sectors tend to launch and market their unique products through the travel retail industry.

Future of Travel Retail Industry

Though the Covid-19 pandemic and the subsequent lockdowns put a strain on the travel and the travel retail industries, market analysts are confident that both these industries will register huge growth rates in the post-pandemic world. Also, digitization of financial services has improved the quality of shopping experience at the transit channels and has helped in reducing the complexities associated with foreign currency exchange. Moreover, the introduction of smart technologies has further improved data collection, which has helped travel retailers to improve their business strategies in a much better way. All these factors point toward a great future of the global retail travel industry.

About the Author(s)

Princy A. J

Princy holds a bachelor’s degree in Civil Engineering from the prestigious Tamil Nadu Dr. M.G.R. University at Chennai, India. After a successful academic record, she pursued her passion for writing. A thorough professional and enthusiastic writer, she enjoys writing on various categories and advancements in the global industries. She plays an instrumental role in writing about current updates, news, blogs, and trends.

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What is a retail travel agency? This is how they operate

What is a retail travel agency for?

What types of retail travel agencies are there, what differentiates a retailer from a wholesaler, what a retail travel agency needs to do to keep customers happy.

If you are reading this article, the chances are you have an interest in the wonderful world of tourism. You will see in the following sections that there are ample opportunities to create or grow a travel agency. First of all, you need prior knowledge of the market, to conduct an analysis of the right tools to offer the services demanded by travelers, but especially you should be aware of the Special Regime for Travel Agencies that will define the operations performed and how they are invoiced depending on the nature of the service offered to customers.

Retail travel agencies are companies that provide their customers, people who want to travel, with services (such as these examples of tourism products) at their destination. These companies act as intermediaries between the tourist and the tourist packages organized by wholesale agencies. A retail agency does not offer its services to other agencies.

These companies are responsible for providing their clients with the trip of their dreams within their budget. They can offer tour packages created by a wholesale company or they can create their own by combining various services in the sector.

When we talk about retailers, we are referring to those travel agencies that offer services directly to the end user, the tourist. Therefore, they provide an intermediary service between a wholesaler and the customer . They have the task of preparing, organizing and selling the services to the tourist so that the trip they are going on is tailored to their liking.

There are different forms that a retail business can take in this area of the tourism industry. For example, a retail travel agency can have the following characteristics that differentiate it from other companies.

In other words, they offer trips previously created by wholesalers, to send people to places different from their hometowns and tailored to their needs.

Their role is to welcome visitors to the area where they are located.

Online Travel Agencies

Also known as OTAs. The European Graduate Center (CEUPE) explains that many retail companies do not have a physical presence and, as a result, offer services but do not usually act as advisors to their customers.

Brick-and-mortar agencies

This is the traditional form that is still in use. It allows for more direct service and for tourism professionals to get to know what the client is looking for and to advise according to their preferences.

Specialized

They offer travel services in a specific niche. These could be for learning languages abroad, adventure and extreme sports, honeymoons, business travel, senior travel, luxury travel, etc.

Basically, retailers choose travel packages that can be adapted to their target market and then recommend and sell these services and package tours to travelers. They are the intermediate company that has to respond to the needs and preferences of the end customer.

Wholesalers, on the other hand, are the ones responsible for creating these vacation packages . They are in contact with hotels, airlines and guides for various excursions. They are also in contact with retail companies that will offer these services to the end user.

Sometimes, retail travel agencies can partner with other agencies to form what are known as travel agency management groups. These groups are “entities” with greater competitive strength in terms of coordination and bargaining power with suppliers. 

The role that these companies play, in itself, can bring a great deal of happiness to people: never forget that a good vacation or a trip to a dream destination can be a great source of joy!

But the service has to be right to fulfill this purpose. However, at the same time, if a company in this sector does not manage to get everything just right, it can ruin one of the highlights of the year for their customers. Here are some tips to ensure that the business runs smoothly and builds customer loyalty:

• Assess customers carefully . Who doesn’t spend months eagerly awaiting their trip of the year? For this reason, companies in this sector need to listen to their customers, find out their preferences and passions and, with this information in hand, advise them on the trip they are going to like the most, in line with their budget.
• Offer advice . A change of scenery is always a new cultural experience. A retail travel agency should also give guidelines to travelers so that they know what they can expect to find in the destination and also what practices will make their experience much more beautiful and enriching.
• Use technology to improve efficiency . Technology helps any experience to be faster and deliver better results. To stay in touch with wholesalers, there are services such as those offered by Hotelmize , which allow the use of big data applied to booking management that helps to find better services and save on costs.

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Marc Truyols has a degree in Tourism from the University of the Balearic Islands. Marc has extensive experience in the leisure, travel and tourism industry. His skills in negotiation, hotel management, customer service, sales and hotel management make him a strong business development professional in the travel industry.

Mize is the leading hotel booking optimization solution in the world. With over 170 partners using our fintech products, Mize creates new extra profit for the hotel booking industry using its fully automated proprietary technology and has generated hundreds of millions of dollars in revenue across its suite of products for its partners. Mize was founded in 2016 with its headquarters in Tel Aviv and offices worldwide.

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Duty free and travel retail industry - statistics & facts

How has the travel retail and duty free industry held up after the pandemic, the duty free market and retail sales of airports, key insights.

Detailed statistics

Leading global travel retailers in 2022, based on turnover

Airports with the most international air passenger traffic worldwide 2023

Avolta: revenue worldwide 2013-2023

Editor’s Picks Current statistics on this topic

Travel retail: global forecast market size 2030

Shopping Behavior

Duty free shop customer conversion rate worldwide 2017-2022

UK: retail revenue of the Heathrow Airport Ltd. in 2022, by category

Further recommended statistics

• Premium Statistic Airports with the most international air passenger traffic worldwide 2023
• Premium Statistic Global air traffic - scheduled passengers 2004-2022
• Premium Statistic World: duty free and travel retail sales 2010-2022
• Premium Statistic Global travel retail sales 2022, by region
• Premium Statistic Duty free shop customer conversion rate worldwide 2017-2022

Leading airports for international air passenger traffic in 2023 (in million international passengers)

Global air traffic - scheduled passengers 2004-2022

Number of scheduled passengers boarded by the global airline industry from 2004 to 2022 (in millions)

World: duty free and travel retail sales 2010-2022

Duty free and travel retail sales worldwide in 2010 to 2022 (in billion U.S. dollars)

Global travel retail sales 2022, by region

Duty free and travel retail sales worldwide in 2022, by region (in billion U.S. dollars)

Customer conversion rate of duty free shops worldwide from 2017 to 2022

Leading travel retailers

• Premium Statistic Leading global travel retailers in 2022, based on turnover
• Basic Statistic Avolta: revenue worldwide 2013-2023
• Premium Statistic Lotte Duty Free: global revenue 2013-2022
• Premium Statistic Turnover of The Shilla Duty Free worldwide 2013-2022
• Premium Statistic China Duty Free Group's global turnover from 2013 to 2022
• Premium Statistic Lagardère Travel Retail: sales worldwide 2014-2022
• Premium Statistic Turnover of DFS worldwide 2013-2022

Leading travel retailers worldwide in 2022, based on turnover (in million euros)

Revenue of Avolta (Dufry) worldwide from 2013 to 2023 (in million Swiss francs)

Lotte Duty Free: global revenue 2013-2022

Turnover of Lotte Duty Free worldwide from 2013 to 2022 (in million euros)

Turnover of The Shilla Duty Free worldwide 2013-2022

Turnover of The Shilla Duty Free worldwide from 2013 to 2022 (in million euros)

China Duty Free Group's global turnover from 2013 to 2022

Turnover of China Duty Free Group worldwide from 2013 to 2022 (in million euros)

Lagardère Travel Retail: sales worldwide 2014-2022

Sales of Lagardère Travel Retail worldwide from 2014 to 2022 (in million euros)

Turnover of DFS worldwide 2013-2022

Turnover of DFS Group worldwide from 2013 to 2022 (in million euros)

Retail revenues of leading airports

• Premium Statistic Changi Airport: concession sales 2017/18 to 2022/23
• Premium Statistic Los Angeles World Airports: duty free operating revenue 2016-2022
• Premium Statistic Revenue of HK International Airport 2023, by segment
• Premium Statistic Offshore duty-free sales value in Hainan, China 2013-2023
• Premium Statistic Sydney Airport revenue 2023, by type
• Premium Statistic UK: retail revenue of the Heathrow Airport Ltd. in 2022, by category
• Premium Statistic Revenue of Schiphol Group in the Netherlands by business area 2022

Changi Airport: concession sales 2017/18 to 2022/23

Value of concession sales of Changi Airport from financial year 2017/18 to financial year 2022/23 (in million Singapore dollars)

Los Angeles World Airports: duty free operating revenue 2016-2022

Duty free revenue of Los Angeles World Airports from FY 2016 to FY 2022 (in million U.S. dollars)

Revenue of HK International Airport 2023, by segment

Revenue of Hong Kong International Airport in FY2023, by segment (in billion Hong Kong dollars)

Offshore duty-free sales value in Hainan, China 2013-2023

Annual offshore duty-free sales value in China's Hainan island from 2013 to 2023 (in billion yuan)

Sydney Airport revenue 2023, by type

Revenue of Sydney airport in Australia in 2023, by type (in million Australian dollars)

Retail revenue of the Heathrow Airport Limited in the United Kingdom (UK) from 2019 to 2022 (in million GBP), by category

Revenue of Schiphol Group in the Netherlands by business area 2022

Distribution of revenue of Schiphol Group in the Netherlands in 2022, by business area

Consumer behavior

• Premium Statistic Duty-free shoppers average spend by category worldwide 2022
• Premium Statistic Duty-free shoppers conversion rate by category worldwide 2022
• Premium Statistic Duty-free shoppers average spend worldwide by age 2022-Q1 2023
• Premium Statistic Share of wallet duty free purchases worldwide Q2 2023
• Premium Statistic Leading categories duty free shoppers traveling with children visit 2023

Duty-free shoppers average spend by category worldwide 2022

Average spend of duty free shoppers in different categories 2022, by region (in U.S. dollars)

Duty-free shoppers conversion rate by category worldwide 2022

Share of duty free shoppers browsing and making a purchase in different categories 2022, by region

Duty-free shoppers average spend worldwide by age 2022-Q1 2023

Average spend of duty free shoppers worldwide in 2022 and 1st quarter 2023, by generation (in U.S. dollars)

Share of wallet duty free purchases worldwide Q2 2023

Duty free purchases of shoppers worldwide as of the 2nd quarter 2023, as a share of total spend

Leading categories duty free shoppers traveling with children visit 2023

Leading duty free categories shoppers traveling with children visited at international airports as of 2023

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The Importance of Travel Retail

After working for a Japanese bank in New York for more than five years, I was sent to Miami to focus on the Travel Retail industry, more commonly known as duty free shops. The Travel Retail or Duty Free Retail industry sells goods to international travelers. Travel retail sales are exempt from taxes when the goods are immediately taken out of the country of purchase.

Vital revenues for the aviation, travel, tourism and maritime industries are generated by travel retail. At airports all over the world, travel retail is the largest contributor to non-aeronautical income. Shopping is a key element of the travel experience for many passengers, and the provision of duty-free retail goods is a service as well as an important revenue generator. More than 1 billion international travelers pass through airports each year, and that number is expected to grow 5% annually, according to industry projections.

Cornerstone of Airport Growth

Travel retail is the cornerstone of airport growth and development with modern airport terminal design recognizing the critical economic role it plays and ensuring new airports come with spacious and vibrant retail spaces.

The top three product categories in global travel retail are fragrances and cosmetics (30%), wines and spirits (17%) and accessories (15%). In 2018, travel retail revenues reached $82.42 billion and are expected to reach $125 billion by 2023.

Travel Retail Keeps Growing

• Increase in travelers – Annually more than 1 billion people travel internationally, approximately 15% of the global population, a figure expected to increase as emerging economies improve.
• The propensity to shop while traveling – travelers have more time to browse in airports designed as inviting shopping spaces.
• Travel retailers use data insights such as advance knowledge of where the customer is coming from and heading, to cater to specific needs. Staff and product displays are organized based on arrival passenger language and cultural sensitivities to ensure that the right products are clearly visible to targeted customers.
• Retailers have a tremendous opportunity to create visibility of their products, increase customer loyalty, recruitment and diversity.
• Aligning luxury with everyday products – travel retail is traditionally a market for luxury and high-end products. So travelers shop for everyday and luxury products in the same location and at significant discounts. High-end luxury product retailers use “minis” and “travel sets” to introduce their products at a discount.

Business Opportunities in Travel Retail

The sector affords SMEs the opportunity to present their products to international travelers at nominal advertising and marketing costs. Large manufacturers see the channel as a cost-effective route to market for new products requiring an international environment.

However, although the channel is lucrative, it is also full of challenges. Air travel requirements – security, passport control, gate closure, etc. – all take time away from browsing and shopping. Another big issue is space. Most travel retail stores, counters and pop-ups operate in a restrictive space, making it difficult to balance merchandizing and positive experience. Baggage allowances and product restrictions also affect the traveler’s propensity to buy.

Taking Advantage of Travel Retail

First is negotiation with airport operators. Travel retail operations are granted via concessions. Concession owners then negotiate with retailers on the appropriate margin based on expected sales volume. Retailers have to negotiate with the operator at each airport if they want to be in that airport and cater to those passengers. Operators look for the retailers that will generate the most sales that translate into more revenue and profit.

According to Moodie Davitt, the largest provider of business intelligence for the travel retail industry, the top five travel retail operators based on sales in 2017 were:

• Dufry – €7.166 billion/USD 8.098 billion (Switzerland)
• Lotte Duty Free – €4.842 billion/USD 5.471 billion (South Korea)
• Lagardere Travel Retail – €3.917 billion/USD 4.426 billion (France)
• DFS Group – €3.670 billion/USD 4.147 billion, Hong Kong based, owned by LVMH (France)
• The Shilla Duty Free – €3.412 billion/3.856 billion (South Korea), owned by Samsung Group

Duty Free Americas, the Miami International Airport concessionaire, ranks #11 with €1.499 billion/USD 1.694 billion in revenue in 2017 and is owned by a Miami-based group.

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4 Key Trends Influencing Travel Retail

As the world begins opening up for travel, the market for travel retail is booming as brands double down their efforts to make up for lost sales during the pandemic.

It is no surprise that the industry expects to grow, and according to business consulting firm Allied Market Research , it will reach $123B by 2023. Travel retail suffered a significant impact due to the COVID-19 pandemic and the ongoing lockdowns in various world regions.

Consumers are undoubtedly anxious to make up for trips lost during the global COVID-19 pandemic, with leisure travel reduced to almost zero and business travel substituted by Zoom meetings. However, the travel retail market is still full of challenges. 

Travel retail is a term that commonly refers to sales made in travel requirements. Duty-free and travel retail encompasses the sale of goods to international travelers.

Duty-free shops are exempt from paying certain local or national taxes and duties requiring travelers to take their purchases out of the country. Duty-free sales occur in highly regulated retail environments like airports, ports, ferries, cruise ships, and national customs authorities govern their operations. 

Unlike traditional retail environments, airport timetables dictate customers’ shopping habits

Clarity Business Partners reported that in 2013, the average amount of time spent in an airport globally was 150 minutes; this dropped to 133 minutes in 2016 and has continued to decrease in recent years. The average time spent shopping in an airport is 29 minutes–not much time to draw someone in and browse the stores. 

In addition to time constraints, there are ongoing issues around baggage allowances and product restrictions.

Often, customers can’t carry everything they might like to buy, forcing them to make difficult choices. These and other external challenges can make it hard to innovate in travel retail. But there are some innovative ways to overcome these travel constraints and present better buying experiences. 

Duty-free and travel retail generates vital revenues for national aviation, travel, and tourism industries.

Airports, in particular, incredibly rely on commercial revenues to fund the development of their infrastructure and help them keep fees as low as possible. At airports across the world, retail is now the most significant contributor to non-aeronautical income. 

Travel retailers can look forward to growing sales over the next few years

Global duty-free retail will grow 8.5% in 2021, with the number of international passengers increases as the world enters into the “new normal” following the pandemic, according to Technavio , a global market research firm.

However, retailers face challenges getting travels into the stores and enticing them to spend. Only 5-10% of travelers visit duty-free retail stores in the terminal.

Retailers in airports, ferry terminals, and train stations need ways to attract and engage passengers and deliver a unique and convenient shopping experience – no matter what currency their customers use or what language they speak.

Retailers have realized that travel retail provides them with tremendous opportunities to create visibility for their products, increases customer loyalty, and recruit new customers in different countries.

As consumers gear up for long-awaited travel adventures, here are four trends retailers can harness to improve their sales. 

Use tech for passenger convenience

Airports, airlines, and ferry terminals are hubs for passenger data because of the multiple digital touchpoints that enable efficient check-in and boarding. Retailers who embrace the desire for digital can provide a seamless shopping experience that entices passengers in the store and engages them before during, and after their trip.

• Partnering with travel operators can unlock access to the travel information needed to create personalized offers and recommendations, starting when a passager books their ticket and checks in for their trip.
• Using data collected from the moment passenger books their ticket to when they check-in for their trip can provide insights into ways to customers with social media. Placing targeted ads and tailored offered is an effective way to create tailored offers that encourage in-store buying. 
• Retailers can create loyalty programs with targeted offers that travelers can access easily on mobile devices, encouraging repeat customers and additional in-store buying.   

Embrace travelers’ changing shopping habits

Millennials now travel more than any other generation, and it is essential to recognize their different shopping habits.

According to data measurement firm Nielsen , 44 percent of millennials are motivated to buy gifts at the airport, 30 percent shop to treat themselves, and 28 percent make impulse purchases. 

The millennial travel shopper is unpredictable, and retailers need to understand their habits to deliver experiences that match their moods, interests, and personalities. Consider these tactics for connecting with the travel generation.

• Connect to travels using their chosen channels, from mobile apps and social media to digitized displays in stores.
• Personalized and location-based deals and recommendations tailed to their interest.
• Use flight info and airport timetables to tailor offers to the travel experience, including passengers’ destination at the time left before they embark. 

Checkout should be as fast as check-in

Travelers of all ages value a quick and easy check-in, baggage, and boarding processes, and they will expect the same when paying for their purchases.

There is a need to support different languages and currencies and the regulatory requirements of various destinations, and this can bring complexity and delays to the travel retail checkout.

It is vital that checkout is smooth and efficient, or it could turn customers away. Pay attention to these tactics that can encourage a seamless shopping experience.

• Provide a range of checkout options, including mobile apps, online, self-service kiosks, or mobile POS.
• Travels should be able to check prices in pay in any currency or combination of currencies they choose.
• Use digital tools to support as many languages as possible both throughout the store and at checkout. 

Leverage data to optimize inventory

Stocking a retail store with products that match travels tastes is a balancing act. There is limited time to capture customers’ interest, and retailers can’t afford to miss a sale by running out of stock.

The challenge is that there isn’t much room for excessive inventory in a busy terminal or on a ferry. It is for retailers to know what sells well to passengers in various locations to make intelligent decisions on inventory.

• To optimize inventory, use business intelligence tools to see where sales occur and understand shopping patterns. These tools can also provide insight into how passengers in different locations respond to promotions.
• The use of apps and loyalty programs combined with info gathered from customers’ online interactions can provide important insight into travelers’ tastes and interests.
• Integrate retail and supply chain systems for efficient orders and insights into supply and demand.  

As travel retail grows, retailers can make their stores part of a seamless travel experience by engaging with passengers with digital and physical channels.

Stay relevant to customers’ needs and interests while providing convenient experiences wherever travelers want to go offers ambitious retailers a profitable opportunity to be a part of customers’ next great adventure.  

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Travel Retail Marketing

Travel retail is the sales channel targeting travellers in duty-free zones such as airports and cruise terminals. Both digital channels and the in-store experience come together in making the user experience more convenient and memorable during their travels. Travel retail marketing plays an important role in reaching potential customers at various stages of their travel journey.

Due to the unique nature of the travel retail sector, the marketing strategy formulated needs to cater to the behaviours and mindset of a traveller who may interact with multiple touchpoints across various devices and formats, both online and offline. It is extremely important to leverage the right channels and touchpoints to bring an engaging experience to your potential customers.

Through user journey mapping, our digital marketing team will gain a clearer understanding of our target audience as travellers. This is then used to create an integrated marketing strategy that leverages the channels with the highest efficacy for reach, awareness, and conversion, working with various partners such as duty-free retailers, trade media, and industry influencers to amplify the marketing efforts.

Our team’s services include campaign planning for product launches, building brand and product awareness, partnership marketing, influencer marketing, and media buying, to name a few.

Our Capabilities

The Macallan Global Travel Retail - New Product Launch Campaign

• Lack of O2O strategy
• Fragmented customer journey
• Missed opportunity for data collection for customer re-engagement and campaign performance analysis

• Using AR in-store to engage offline users, bringing them onto digital channels
• Data collection for remarketing
• Integrated marketing plan to reach users at different stages of their travel journey

• Improved the seamlessness of the customer journey and brand experience
• Reconnected with online users across multiple channels
• Measured success of campaign through gathered data on digital channels, setting a benchmark for future campaigns

The team at RFI have had extensive experience working with travel retail clients and have a deep understanding of the importance of the online-offline-online strategy required to engage the traveller audience segment. With full-stack digital marketing capabilities from strategy development to execution, campaign ideation to design and copy development, RFI can help your travel retail business achieve its brand and business objectives.

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Ready for departure: How the travel retail sector can succeed in the post-Covid environment

By Gabriel Schillaci

Recommendations and case studies for airports and retailers

Like all aviation-related industries, the travel retail sector has been turned on its head by the Covid-19 pandemic. A change in the passenger mix at airports, as well as longer idle times due to Covid-related delays, are driving new trends and behaviors. Digital channels are becoming increasingly important, for example, and shoppers are buying more because shops are quieter. Travel retailers need to adapt to these changes, or risk being left behind. In this article we assess the transformation taking place in the sector and present a series of recommendations for airports and retailers on how they can not only adapt to the new challenges, but also thrive. We also offer two case studies outlining successful Roland Berger travel retail projects.

"Airports, retailers and the entire ecosystem must embrace the new market dynamics."

The Covid-19 pandemic has likely changed the air travel market for some time to come. Business travel has been decimated as workers switch to virtual mobility tools, one in five private travelers are choosing to fly domestically rather than internationally and passenger demand is set to remain well below pre-Covid forecasts for years to come, according to a recent Roland Berger study.

While airlines and airports have borne the brunt of the crisis, this reshuffled passenger mix has also had a profound impact on the travel retail sector. For example, fewer big-spending intercontinental passengers from Asia or Brazil mean fewer high-end sales, with retailers now having to adapt their offer to better suit the growing proportion of continental / domestic passengers, and especially low-cost passengers. On the other hand, less traffic and strong concerns over Covid-related delays at airports mean passengers are spending longer periods in airports, pushing up idle times available for shopping.

"Airports need to refocus their offer on their core passengers. They must adapt their product assortment and merchandizing to target the growing share of low-cost passengers."

New trends = new behaviors

This shift has accelerated several trends in travel retail, some that existed pre-Covid and some a result of the pandemic. First, the digital effect has become more pronounced. Retailers’ and brands’ omnichannel strategies are increasingly influencing clients, and e-commerce is driving up pricing transparency. Second, new forms of competition, such as social media use and music and video streaming are vying for passengers’ idle time. Third, the range of offers at some airports, which for years have been focused on either luxury or high-volume items, are becoming less attractive. Fourth, passengers now expect more than just traditional airport “shopping”, with demand growing for experience-based events, especially virtual ones. Finally, opportunities are growing to capture and exploit passenger data.

These trends and the reshuffled passenger mix are driving changes in buyer behavior. With less traffic in airports, passengers are buying more because the quieter environment makes it more appealing to spend time in airport shops. Increased idle times also mean they stay longer. In addition, better price transparency means that passengers can more easily compare duty free offers against online or Main Street prices, and dismiss offers that are not the bargain they purport to be.

Recommendations: How can travel retailers adapt?

The upshot is that travel retail players need to adapt to survive. In short, airports, retailers and the entire ecosystem must embrace the new market dynamics. To do this, we believe they need to focus on two key areas: revamping their traditional offer and reinventing their business models. Below we give our recommendations.

"Collaboration between airlines, airports and travel retailers is essential to realize the potential of new business models."

Revamp the offer

Refocus on core passengers: Travel retailers know that some passengers spend more than others. Their traditional offer has always included a premium element (designer stores, upmarket boutiques and restaurants, etc.) to cater to them. But this low volume/high value market has been badly hit by travel restrictions placed on some of its biggest spenders, such as Asian or Brazilian passengers. As a result, airports need to refocus their offer on their core passengers. They must adapt their product assortment and merchandizing to target the growing share of low-cost passengers, who while traveling low cost, do not necessarily have lower purchasing power at the airport.

Renew formats: To stay fresh, travel retailers need to frequently reinvent their formats. These might include pop-up stores, shop-in-shops, live performances and games. Integrating modularity into the design of commercial spaces helps with this.

Modernize concepts: A purely transactional approach to travel retail is no longer enough. Players must develop concepts such as retail-as-a-media, where capturing data points on passengers is more valuable than making a sale. This involves showcasing, for example, electronics, with customers able to try out new products provided they register first.

Offer experiences: Memorable events can improve brand awareness, customer relations and sales. With their captive audiences, airports provide a perfect platform for surprising, entertaining events, such as concerts, virtual reality experiences and selfie-worthy backdrops.

Leverage data and AI: Good use of data can help turbocharge a retailer. For example, ultra-personalization can help to cement client relationships and performance can be improved by closely monitoring datapoints and adapting to changes accordingly.

"Our expert teams have considerable knowledge of travel retail, and have supported airports, travel retailers, brands and airlines through a host of strategic and operational challenges."

Reinvent business models

Leverage cooperation and value sharing: Collaboration between airlines, airports and travel retailers is essential to realize the potential of new business models. This could include developing loyalty cards for a retailer or airline, or a branded payment card for a retailer.

Case studies: Roland Berger success stories

Our expert teams have considerable knowledge of travel retail, and have supported airports, travel retailers, brands and airlines through a host of strategic and operational challenges. The following case studies highlight two recent success stories. Feel free to get in touch for more information.

Case study 1: Airport

Project: A well-known European airport had a bottleneck in travel retail sales growth. Roland Berger was tasked with identifying the root cause and finding a transformation solution.

Approach: A comprehensive internal diagnosis identified declining sales per passenger as the root cause. Key factors behind this included passengers perceiving the retail offer to be expensive, an indifferent quality of assortment, insufficient consumer traction and a below-average commercial footprint.

Benchmarking against best practices at the airport’s leading competitors revealed it needed to step up to remain competitive. As such, we designed a commercial strategy with six key focus areas:

Case study 2: Duty-free retailer

Project: A leading Asian duty-free player wanted to win a concession in a major airport in Japan.

Approach: We conducted a thorough analysis of the retail RFP issued by the airport and compared it to the airport's specificities to determine the perfect requirements of its retail business. We identified three key needs, and proposed three corresponding KSFs:

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• Publications
• Recommendations for successful travel retail

4 reasons why travel retail is booming

Why this expansion?

1. more people travel, 2. travelers are more prone to shop while en route.

• The open-plan setup: Airports are a democratic shopping spaces – much more so than malls and high streets. In airports the differentiation between luxury and casual brands becomes blurred. Travelers just need to enter the open-plan stores (as airport shops have no doors) to access brands and items they may not have visited in a more traditional setting.
• Free time to browse and buy: Long waits and demands to show up in advance provide passengers with a lot of time to spare in airports. As airports are constructed as shopping spaces, which encourage passengers to leisurely walk around and shop during their wait.
• Holiday atmosphere: After having passed check-ins and security controls, passengers traveling for leisure are left in the right condition to buy items – whether to indulge themselves, to start off or cap off their trip.

3. Retailers can use data insights to better cater for customers

4. products get even more visibility.

Retailers have realized that travel retail provides them with tremendous opportunities to create visibility for their products, increase customer loyalty and recruit new customers in different countries. Airports have become an area where brands test their possible success in new markets, basing on customers’ nationalities and flight destinations. Many brands also offer “travel retail exclusive”, special products which are only available to travelers to entice shoppers to buy appealing to their desire for exclusive items.   Travel retail is, in many ways, different from traditional retail spaces. Brands have managed to capitalize on the differences to tap into a very lucrative market. As travel retail is expected to grow steadily in the next few years, brands count on some of their success in airports to trickle down to their traditional stores, and possibly help open new, profitable markets.  

Don’t buy retail management software until you read this

What is the difference between a retail travel agent and a wholesale travel agent?

Faqs about the difference between a retail travel agent and a wholesale travel agent:, 1. what services can i expect from a retail travel agent, 2. what kind of customers do retail travel agents typically serve, 3. can a retail travel agent provide better deals compared to wholesale travel agents, 4. what benefits do wholesale travel agents offer, 5. can i contact a wholesale travel agent directly, 6. are there any disadvantages to using a retail travel agent, 7. how can i find a reliable retail travel agent, 8. do wholesale travel agents offer packages for specific destinations or types of travel, 9. can i negotiate prices with a retail travel agent, 10. do retail and wholesale travel agents have different access to deals and promotions, 11. can wholesale travel agents assist with complex travel itineraries, 12. are there any advantages to booking directly with travel suppliers instead of using a retail travel agent.

A retail travel agent and a wholesale travel agent are both professionals in the travel industry, but they serve different purposes and cater to different clienteles. Understanding the differences between these two types of agents is essential for travelers seeking assistance in planning their trips.

Retail travel agents, also known as leisure or traditional travel agents, provide travel-related services directly to individual customers. These agents are the ones you typically find in brick-and-mortar travel agencies or online platforms. They specialize in offering vacation packages, airline tickets, hotel reservations, and other travel-related services to individuals and families. Retail travel agents essentially act as intermediaries between travelers and travel service providers, helping their clients find the best deals and providing personalized advice based on their preferences. They offer a wide range of travel options and often have access to exclusive deals, ensuring that their clients have the best possible travel experience.

On the other hand, wholesale travel agents, also referred to as tour operators or travel wholesalers, primarily focus on providing travel services to travel agencies and other travel-related businesses. They negotiate and create travel packages, including accommodations, transportation, activities, and more, which they then market and sell to retail travel agents. Wholesale travel agents play a crucial role in the travel industry by curating and packaging various travel components, simplifying the process for retail agents and their clients. These packages often come at discounted rates, allowing retail travel agents to offer competitive prices to their customers. By partnering with multiple travel suppliers and consolidating services, wholesale travel agents can offer a wide range of options and more affordable travel experiences.

Retail travel agents can help you with various travel-related services, including booking flights, accommodations, car rentals, cruises, and vacation packages. They can also assist with visa applications, travel insurance, and provide valuable recommendations and advice based on your specific preferences and budget.

Retail travel agents cater to individual travelers and families who are seeking assistance in planning their vacations. They help clients choose destinations, find the best deals, and create customized itineraries to suit their unique needs and interests.

While wholesale travel agents often offer discounted rates to retail travel agents, retail agents have the advantage of providing personalized advice and customized itineraries tailored to the specific needs of individual travelers. By leveraging their knowledge and relationships with various travel suppliers, retail travel agents can often secure competitive deals for their clients.

Wholesale travel agents play a crucial role in the travel industry by consolidating various travel services into packages that can be sold to retail travel agents. This simplifies the booking process for retail agents, allowing them to offer a wide range of options at competitive prices to their clients. Wholesale travel agents also negotiate deals with suppliers, which can result in cost savings for retail travel agents and their customers.

Wholesale travel agents primarily work with retail travel agents and other travel-related businesses. As an individual traveler, it is more common to seek assistance from a retail travel agent who can access the packages and deals offered by wholesale agents. However, some wholesale travel agents may have services available for direct consumers as well.

One potential drawback of using a retail travel agent is the service fee they may charge for their assistance. While many agents do not charge fees for certain services, others may require a fee for more complex itineraries or specialized services. It is important to clarify any fees upfront to avoid surprises.

To find a trustworthy retail travel agent, consider asking for recommendations from friends or family who have used their services before. You can also read reviews or check for memberships with industry associations, such as the American Society of Travel Advisors (ASTA), to ensure professionalism and expertise.

Yes, wholesale travel agents often create packages for specific destinations or types of travel experiences. They may design packages for popular tourist destinations, adventure trips, luxury vacations, or niche travel markets. Retail travel agents can assist in finding and customizing these packages to suit individual preferences.

Retail travel agents have the expertise to negotiate prices with certain travel service providers, especially when it comes to group travel or tailored experiences. However, it is important to keep in mind that negotiations may not always be possible or successful, as prices are determined by various factors, including availability and market conditions.

Wholesale travel agents often have access to exclusive deals and promotions specifically designed for retail travel agents. Retail agents, in turn, offer these deals to their clients along with their expertise and personalized service. Both types of agents aim to provide the best possible travel experiences while offering competitive rates.

Wholesale travel agents primarily focus on creating and packaging travel components but may not provide the same level of assistance for complex itineraries as retail travel agents. Retail agents are better equipped to handle intricate plans and tailor-made experiences to ensure a seamless and personalized trip.

Booking directly with travel suppliers can be advantageous in certain situations, especially if you have a specific preference or loyalty to a particular supplier. However, using a retail travel agent offers the benefit of personalized service, expert advice, access to exclusive deals, and a streamlined experience when handling multiple travel components. Retail agents can save you time and effort by taking care of all the arrangements, ensuring a stress-free travel experience.

These frequently asked questions provide a deeper understanding of the key differences between retail and wholesale travel agents and how they can assist travelers in different ways. Whether you choose to work with a retail travel agent or take advantage of the packages offered by wholesale agents, the primary goal remains the same: to ensure you have a memorable and enjoyable travel experience without the stress of planning and organizing every aspect yourself.

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The Anatomy of Travel Retail

LONDON, United Kingdom — Travel retail typically plays second fiddle in brand communications, which emphasise flagship mono-brand stores. But, people travelling account for 40 percent of global spending on personal luxury goods, with 12 to 13 percent captured by the specialised and globally dispersed travel retail channel.

Airport malls account for almost 60 percent of the travel retail market, but the travel retail channel also includes ferries and cruises, border shops and downtown duty and tax-free shops.

These channels each have their own characteristics. Airport operators typically charge rent as a percentage of sales, which limits the potential upside for retailers as it reduces their operating leverage. Additionally, airport locations normally come with guaranteed minima attached. These can be expressed as absolute dollar amounts, in which case the retailer bears a traffic, consumer mix and execution risk. More frequently however, the dollar amounts are linked to traffic volume, in which case the retailer carries the consumer mix and execution risk only.

By contrast, the economics of downtown travel retail are similar to those of traditional luxury retail operations under fixed rental cost agreements. These stores typically have higher potential for operating leverage. Downtown and border shops compete directly with tax refund and display the same fundamental dynamics; fast growth with the continuing rise in traveller numbers, susceptibility to travel disruption and dependence on key brands. However, downtown tax free stores follow the business logic and constraints of the traditional high street, where tax refunds are available.

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Tax and duty free stores have a clear price advantage over the domestic market. They also face limited direct competition from other retailers, especially on core categories — airports with two or more operators for a single category are a minority. However, space growth is constrained by the need to win and retain concessions.

Diverse approaches to a complex channel

LVMH is the only luxury goods player with significant direct operations in travel retail, through its selective retail division. The division, comprising of duty free operator DFS and beauty products chain Sephora, booked sales of €9.5 billion (about $10.38 billion) and operating earnings of €882 million (almost $964 million) in 2014. Of this, DFS contributed an estimated 42 percent of sales and 38 percent of profits.

Salvatore Ferragamo is by far the most exposed brand to travel retail, with 138 duty free locations, more than twice as many as the number two, Hermès. It also operates nearly 27 percent of travel retail mono-brand points-of-sale (POS). Hermès and Bulgari follow with 60 and 51 travel retail locations respectively, each with about 19 percent of travel retail mono-brand POS. The list continues with Gucci , Swatch and Cartier.

The brand order is very different in terms of travel retail POS as a percentage of total POS: Shanghai Tang (30 percent), Givenchy (16 percent), Chloé (14 percent), Bottega Veneta (10 percent). But the picture could change as more and more travel retail POS are opened. In the past two years, Swatch has opened 26, Hermès and Givenchy have opened 13, Chloé 11, Bottega Veneta 10, Bulgari 10 and Cartier nine.

Hermès is the most exposed of the high-end brands, by a big margin, with 49 airport locations (Bottega Veneta 19, Chanel seven, Dior three).

Among the mega-brands, Louis Vuitton has the lowest exposure to travel retail, with only two airport locations (Gucci 31, Burberry 22, Prada nine). However, the brand operates 15 downtown locations, piggybacking on DFS Galleria (Gucci 15, Prada 15). This could give Louis Vuitton better marginal headroom for space growth, should it decide to expand more meaningfully into accessible categories — fashion jewellery, eyewear, fragrances and cosmetics, and silk scarves.

Will travel, will spend

The overall market is growing fast, by an aggregate 8.4 percent a year in the past 10 years. This is several percentage points faster than the broader personal luxury goods market and nearly three times as fast as GDP. If we include spirits, cigarettes and electronics, the travel retail market has doubled in value during the period, to about $63 billion.

Asia-Pacific is the largest and fastest growing region for travel retail ($24 billion, 13.8 percent compound growth between 2004 and 2014), with sales largely through airports, and downtown and border shops. Seven of the top eight downtown duty free locations are in Asia. Europe is the second-biggest region ($21 billion), but has the lowest growth (4.4 percent in 2004–14) and is focused on airports ($14.2 billion). The Americas region is worth about $11.5 ($6.3 billion in border shops, $4.6 billion in airports) and is growing by 7.1 percent a year. The Middle Easter and Africa market is about $6.7 billion, focused mainly on airports ($5 billion), with a compound annual growth rate of 12.4 percent for 2004–14.

As may be expected, the biggest country is Greater China (Mainland, Hong Kong, Macau, plus Taiwan), at about $10 billion, followed by South Korea ($8 billion). The third market is USA ($3.8 billion) followed by big western European countries (UK $3.7 billion, Germany $2.9 billion), the UAE ($2.7 billion) and Turkey ($2.2 billion).

However, the travel retail market is by nature sensitive both to foreign exchange rates and to exogenous shocks; terrorism, health scares, financial crises and so on. For example, the weakness of the yen and the euro have encouraged a sharp increase in spend in Japan and the Eurozone, primarily by Chinese consumers — and by Chinese professionals arbitraging price differences by buying in Europe to sell then in China through specialist websites. By the same token, Japanese consumers have withdrawn from international markets. Meanwhile, the stronger United States dollar is feeding hopes of a revival in international American spend worldwide. Currency fluctuations have also been partly responsible for a nominal slowdown in market growth in the last three years.

Conversely, regional diversity helps cushion the impact of external shocks. The buoyancy of Asian and Chinese demand has been further support. By the end of 2010, the travel retail market had fully recovered from the 2009 financial crisis and even exceeded the 2008 level — a strong performance in Asia-Pacific and the Middle East more than offset a slower recovery in Europe and Latin America.

The regional figures also underline the growing importance of emerging-market travellers. They are expected to be one of the main forces behind the forecasted doubling of air traffic in the next 15 years, including sharp increases in domestic air traffic in developing Asia and Latin America. This offers a potentially rich target for travel retail.

The result is a positive double-whammy outlook for travel retail, as emerging market nationalities are also the biggest spenders per passenger. Travel retail should therefore continue to grow faster than the personal luxury goods market.

Luca Solca is the head of luxury goods at BNP Exane Paribas.

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Key factors shaping global travel retail

The global travel retail market is in a unique position to capture the attention of billions of consumers. As well as opportunities, the sector also faces challenges, as we highlight in this report.

We explore the trends shaping global travel retail and the challenges the channel is facing

Success in global travel retail (GTR) is inextricably tied to people’s ability to both travel and spend, and is therefore at the mercy of volatile external factors – whether Brexit, political riots or the spread of infectious disease. At the same time, there are internal challenges in the channel that risk stymying progress, from pricing pressures to legislative hurdles, the latter of which has a real bearing on spirits.

As the former Tax Free World Association (TFWA) president Erik Juul-Mortensen explained during the group’s World Exhibition & Conference last year, the travel retail industry has “never before faced so many challenges to its operating environment on a global scale”.

His successor, Alain Maingreaud, dissects the predicament further: “The global duty free and travel retail market is in a strong position, with passenger numbers and sales continuing to rise. However, we are facing a number of threats from different quarters, including the continuing debate around restrictions on hand baggage and increasingly draconian policies around the sale of alcohol and tobacco products.

“Rising geopolitical tensions, such as the looming threat of worsening trade relations between the US and China, as well as ongoing uncertainty over Brexit in the UK and rising concerns about sustainability among consumers, are also having an impact on the market. It is only by working together as a unified industry that we will be able to meet and overcome these challenges.”

Indeed, there is movement for change, and despite the turbulence, optimists will tell you that no market in the world holds as much potential as GTR.

“It’s rare to find so many opportunities for growth in a marketplace, and that’s what makes [GTR] such a dynamic and exciting industry to be part of,” enthuses Dafydd Williams, head of marketing and innovation at Diageo Global Travel Retail, whose sales increased by 5% in 2017/18, according to IWSR. “It’s a big market already and growth is being fuelled by more passengers entering various parts of the channel.”

In 2018, air passenger traffic increased by 6% year on year to 8.8 billion, exceeding the CAGR of 4.3% for 2007-2017, according to preliminary figures released by Airports Council International (ACI). Passenger traffic at the world’s 20 busiest airports – which represent 17% of all global passenger traffic – grew by 4.7% in 2018 to 1.5bn.

Air passenger numbers are increasing

Increasing air traffic has had a direct effect on spirits sales, notes Williams. Citing IWSR research, he says that between 2014 and 2018, 400 million more international departing passengers came into the channel, helping to “fuel the alcohol category by about 3% over that period”. He adds that GTR is the biggest market for Diageo in terms of people, with a bigger ‘population’ than both India and China. “And the vast majority are legal-purchase age, giving us a really unique opportunity to interact with consumers across the globe,” says Williams. “[GTR is] really important to Diageo, and it’s set to become even more so in future years.”

Spirits sales ‘softening’

The entire GTR sector received a boost in 2018, according to preliminary Generation Research figures provided by the TFWA – up by 9.3% in 2018 to US$75.7bn. Wine and spirits is the second-largest GTR category, after fragrances and cosmetics, and saw sales increase by 7.2% last year to US$12.2bn. With premiumisation sweeping all segments in GTR, drinks brands are well placed to capitalise on shoppers’ move upmarket, having practised in domestic territories.

“The market is continuing to perform strongly,” notes Maingreaud, “with growing numbers of millennial travellers and middle-class consumers from China leading to an increase in demand for premium spirits. Domestic trends, such as the rising popularity of gin in Europe and Tequila in the US, are also moving across to the duty free and travel retail market, with customers now expecting to find their brand of choice at the airport.”

The IWSR separates the performance of wine and spirits in its own volume data, and identifies a “softening” of sales for spirits in 2018 (up 2.5% to 24.5m cases), the result of a “slight decline” in Europe. Johnnie Walker remains the best-performing spirit brand in the channel (see table, overleaf) and reported the highest volume sales growth last year, followed by Aperol and Jägermeister respectively. The IWSR predicts that burgeoning categories such as gin,

Japanese whisky and cane spirits will lead volume growth for spirits in GTR over the next five years.

This would be good news for Venezuelan rum brand Diplomático. The brand’s biggest travel markets are in Europe, but it has been “very active” in the Americas and has recently “opened up new opportunities” in the Middle East, Australia, New Zealand, Hong Kong and Singapore. However, the brand’s global managing director, Patrick Rabion, wants to see retailers offer more shelf space to super-premium rum in the future. “In this complex and highly concentrated business, it is important for Diplomático to increase its exposure to deliver premium brand experiences,” he says. “Operators need to dedicate more space to this fast-growing category so it can compete with other premium dark spirits and offer the variety consumers are looking for in GTR.”

As the old adage goes, with challenge comes opportunity – and GTR has both in spades. Over the following pages we take an in-depth look at some of the key themes affecting spirits in duty free and travel retail – for better or for worse.

This year, the TFWA World Exhibition & Conference in Cannes will replace its Digital Village with a new Innovation Lab, designed to “showcase new ideas and fresh thinking” to an audience of travel retail professionals. As GTR seeks to quicken its pace of evolution, innovation is becoming increasingly important to all aspects of the channel. For spirits brands, it is playing a central role in new product development and marketing.

“Brands are really starting to show up strong in this space, and it’s been great to see the constant pushing of creative boundaries, by us and our competitors,” says Ed Stening, global head of marketing for travel retail at Beam Suntory. “The experiences brands are giving travellers are getting better month by month, [and] it’s not just happening in one place – it’s happening everywhere.” Stening adds that innovation is “growing basket-size in the category” and is helping the channel to become “more consumer-centric”.

Diageo is a prime example of a drinks firm capitalising on the consumer zeitgeist in GTR. As well as its core variants, the group’s innovations have bolstered its success in travel retail – notably, its Game of Thrones-inspired products. White Walker by Johnnie Walker launched in GTR in October, followed by the Game of Thrones Single Malt Collection this year. Diageo highlighted the range with a “one-of-a-kind” activation at Changi airport, which even featured props from the HBO programme.

“When it comes to all of our brands, finding the right partners is really important; finding that strong alignment in consumer offering,” explains Williams. “I think you’ll definitely see more of that going forward.”

According to Julie Witherden, marketing director at Bacardi Global Travel Retail, GTR shoppers “are in a discovery mindset – they are in the mood to try something different”. As such, she says 40% of alcohol shoppers buy products that are unique to the channel, where they have additional time to take in brand stories.

“With passenger dwell times averaging 73 minutes, we have the opportunity to communicate brand intrinsics and to sample signature serves in ways that domestic retail does not facilitate,” says Witherden.

For portfolio newcomer Patrón, Bacardi launched a sampling area in Cancún as part of a five-year agreement between the producer, the airport and Dufry. “The bar enables us to engage with consumers in new ways, inspiring great memories of their travels, while educating them on the benefits of the premium Tequila category,” adds Witherden.

These days one cannot speak of innovation without highlighting the importance of digital technology. This is particularly pertinent to travel retail stakeholders in light of mounting competition from e-commerce. Shoppers have become astute at comparing prices online and have grown accustomed to the convenience online shopping offers. As such, GTR risks missing out if it does not evolve beyond bricks and mortar.

“It’s fair to say that in travel retail we are slightly under-penetrated in this channel versus what people see in domestic markets,” observes Diageo’s Williams. “There’s definitely an opportunity to leverage some of those key learnings, and because of the global nature of travel retail there are opportunities for thought leadership as well.”

GTR has arguably been slow in responding to this shift in shopper behaviour, but as Beam Suntory’s Stening notes, it’s now a case of “survive or die”. He adds: “We cannot rest on the success of the past, so the model must evolve [as] e-commerce and big box retail has reshaped the shopper’s journey. It is a challenge, but it’s also a positive opportunity, which must be acted on now.”

Stening says retailers have “started to understand the role convenience plays”, and there is even speculation in the industry about what a bottle-free travel retail environment would look like. “The conversations around digital are still in the early phases and it’s a slower machine to turn, [but] the industry has recognised that and they are trying to move forward,” he says. One example is Schiphol, which became the first airport in Europe to adopt the

WeChat app, which has more than 1bn active users in Mainland China, and features the mobile function WeChat Pay.

However, Stening believes: “Show rooming is here to stay in the business. That’s where unique travel retail innovations are playing a deeper role in the customer journey. Price is always going to be important but it cannot be the only differentiator or we’ll just end up in a death spiral, racing to the bottom.”

Beyond e-commerce, digital marketing in general needs to be become more sophisticated in travel retail, says Stening, and play a significant role throughout the “entire customer journey”. He adds: “When I first came to this business, people spoke about digital as digital screens in airports – that was seen as the digital channel. The screens would change based on passenger type, which is pretty simple in terms of what we can do, and that was seen as the benchmark of digital. We have really got to evolve from that – that can’t be ‘ticking the digital box’.”

As stakeholders seek out new opportunities, access to reliable sales data is critical, but in this concession-driven industry, it is not easy to come by. The sector has praised Generation Research and IWSR for their work, but there are calls for greater openness within the travel retail ‘trinity’ of landlord, retailer and brand.

Stening says provision of data is “how the industry will survive”. He adds: “There needs to be a greater approach to sharing. Relying on IWSR and passenger data alone is very difficult. We don’t have a lot of information to make the necessary strategic decisions. If we are trying to find ways of explaining to our organisation why this is a channel we want to invest in, that data has to be there.”

Maingreaud agrees, saying: “There is still much work to be done in this regard. The fact of the matter is that the only global figures available to our industry are questioned by many. We as an industry must understand the importance of sharing data to gain a better understanding of passengers and their needs.”

A big step forward was taken in 2018 with the establishment of the Travel Retail Data Innovation Group (TRDIG). The group is made of suppliers, retailers and IT service providers, who are working to create a global exchange of master data in the duty free industry. In May, five leading travel retailers – Heinemann, Dufry, DFS, Lagardère and Kappe – hosted the group’s second annual strategy meeting in Hamburg. The data pool is now live, and a number of decision-makers have pledged to connect to the TRDIG data pool by 2019 and use it for master data exchange. Heinemann is aiming to integrate 80% of its data – including liquor – into the pool by the end of the year.

“We will continue to promote our vision for the standardised and automated exchange of master data across the industry,” says Inken Callsen, director of fulfilment at Gebr Heinemann. “Our common goal is to prove that we in travel retail have a different mindset to all other industries because we understand that collaboration in this aspect of the business is not a competition, but a real advantage for the whole market. After all, the more partners we have in the global data pool, the better.”

Many would like this ethos of collaboration to extend more fully to the parties in travel retail’s trinity structure of landlords, retailers and brands, which has long been criticised for what are seen as unsustainable commercial agreements. The TFWA continues to warn of the trinity’s failure to appropriately “share both the risks and rewards” within the business.

Brands often bear the brunt of passed-down costs, which can be particularly debilitating for newer or smaller players in the market. “In the medium to long term, the sustainability of the channel will depend on the trinity model and how it caters for all involved,” says André de Almeida, managing director of Loch Lomond Group’s travel retail business, which was established three years ago.

“For example, if airports continue to push on non-aeronautical revenue generation by squeezing retailers too hard, this could lead to increased demands on brands and more suppliers in the channel questioning the overall benefit of it. This could have the adverse effect of making the barrier to entry even higher for new brands and lead to decreased diversity on offer, reduced consumer engagement and lower store penetration.”

During last year’s TFWA event in Cannes, a discussion panel that included top execs from Heinemann, Lagardère and King Power agreed that the model was problematic, but also acknowledged that action to rectify it had been limited. Dufry CEO Julián Díaz González said retailers had “not been able to convince the landlords that we are not a sustainable business. They do not know what the answer is because they see the short term. We need to convince the landlords that this is a collaboration and not a fight”.

For Beam Suntory’s Stening, the trinity model is inherently flawed due to its failure to include airlines, which he describes as travel retail’s “fourth pillar”. He explains: “I really think airlines should be included in the trinity model. They play such an important role in the customer journey – from check-in to lounges to in-flight to arrivals – that they need to be part of that discussion.”

Legislation

More than any other category – except perhaps tobacco – the alcoholic drinks segment in GTR has come under intense legislative scrutiny. The category has faced calls for additional labelling, such as health warnings and nutritional information, reflecting the enhanced measures recently introduced in some domestic markets. However, stakeholders are fighting against the calls, arguing that such legislation is not transferable to GTR.

Julie Lassaigne, secretary general at the European Travel Retail Confederation (ETRC), explains: “The requirement to provide information ‘on pack’ creates substantial problems for the duty free and travel retail channel, particularly when national language requirements or specific national/regional labelling laws are incorporated into regulatory initiatives. If applied to our channel, it would make it extremely difficult to have only one global product for our retail channel, therefore jeopardising travel retail-exclusives and reducing consumer choice.”

As such, the ETRC has developed a technology solution that allows consumers to access product information in multiple languages by scanning a barcode using a smartphone or in-store scanners. The association is now working with its members to move the project forward and gain approval from EU legislators.

But the legislative headache extends beyond labelling, with the debate over airport security restrictions on liquids and conflicting baggage airline policies rumbling on.

According to Lassaigne: “Consumer confidence in airport shopping has been considerably undermined as passengers observe the strict enforcement of these policies by certain carriers, and have at times been subjected by ground-handlers to similar restrictions on other carriers without these policies, generating further confusion.”

As such, the ETRC is lobbying for EU legislation to be amended to allow passengers the right to bring airport purchases on board at no extra cost, and in addition to their prescribed hand luggage.

One of the biggest fallouts from punitive legislation in travel retail occurred in August this year, when DFS announced the decision to close its liquor and tobacco concession at Singapore’s Changi Airport – one of the world’s busiest airports – when its term expires in June 2020. DFS has held the concession since 1980, but according to the group’s CEO, Ed Brennan, “changing regulations concerning the sale of liquor and tobacco, against global context of geopolitical uncertainty, meant that staying in Changi was not a viable option”. The “changing regulations” refer to Singapore’s plans to sell tobacco in standardised packaging from July 2020, and this year’s introduction of a further restriction on duty-free alcohol bought at arrivals, from three litres to two.

No talk of geopolitical uncertainty would be complete without a focus on the UK’s scheduled departure from the EU. While Brexit has largely been seen as a headache for international trade, it has presented an opportunity for the GTR market: the return of duty-free shopping between the UK and EU.

However, with a new UK prime minister in the hot seat and negotiations between the UK and EU seemingly at a stalemate, the divorce remains riddled with uncertainty. There is a risk of both a no-deal Brexit and a no-confidence vote in the government, potentially leading to a general election. At time of writing, neither action was confirmed.

Since January, the ETRC has been warning its members to prepare for a no-deal scenario, and has been concerned about probable disruptions to supply chains caused by the UK leaving the single market.

However, the association has “one clear demand”, says Lassaigne. “That the current EU legislation on duty and tax free sales to travellers simply applies when the UK leaves the EU and becomes a third country, meaning outbound duty and tax-free allowances will become available to travellers departing from the EU for the UK – and vice-versa.”

The European Commission has confirmed the move twice and the ETRC has “arranged a number of meetings in Brussels in September to ensure it remains the position of the EU”. However, the immediate return of duty-free shopping for UK travellers to the EU would require an amendment to current UK law, which the ETRC, its UK counterpart and authorities are working to achieve.

In a few short years, the archetypal traveller has changed dramatically, with eastern consumers now making up a much larger demographic. “Shoppers in travel retail are trading up to super-premium spirits, and this is a huge opportunity for us worldwide, especially relevant in Asia Pacific, led by the rising middle classes in China and India who are seeking to discover new brands and experiences on their travels,” says Vinay Golikeri, managing director of Bacardi Global Travel Retail. “Growth in Asia is undoubtedly one of the industry’s headline trends.”

According to preliminary Generation Research figures, Asia Pacific continues to be the largest market for duty free and travel retail, registering a sales growth of 14.2% to US$35.2bn in 2018. Wines and spirits sales in the region grew by 10.2% to US$4.2bn in the year. Growth has been fuelled by an increase in outbound Chinese travellers, which according to the China National Tourism Administration increased from 83.2m in 2012 to 129m in 2017.

However, clouds could be on the horizon in the wake of the Hong Kong pro-democracy protests. According to the latest data from Forward Keys, people are avoiding travelling to Hong Kong in light of the protests, which have seen sieges, rioting, arrests and, on 12 August, the unprecedented closure of Hong Kong International Airport.

In the eight-week period from 16 June to 9 August, flight bookings to Hong Kong from Asian markets (excluding Taiwan) fell by 20.2%. Long-haul bookings were also down by 4.7%. In a statement issued in August, Forward Keys spokesperson David Tarsh said: “Forward Keys is not optimistic about reporting a recovery in the immediate future.”

It is too early to fathom the immediate impact the disruption has had on travel retail sales in Hong Kong and how this will affect the performance of the wider Asia Pacific region for the year. Stakeholders will be hoping the channel’s trademark resilience comes into effect once more.

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Five potential indicators for the future of travel retail

“Experiences are more important than possessions.” This has become a mantra of Asia’s tourism industry as it seeks to understand how travel behaviors may evolve post-pandemic.

The underlying precept is that travelers may want to escape to nature, to experience freedom in serene landscapes rather than spend time shopping when travel bans are eventually lifted. Tourists radiating away from urban centers could dampen the much-hoped-for revival of travel retail spending.

Yet, predicting future trends in Asian travel is risky. Having been unable to fly beyond borders for 15 months and counting may mean that caution and safety remain paramount, at least initially. Alternatively, grounded travelers may take to the skies in large numbers as soon as the airport gates are opened.

But when travel does resume, will “revenge spend” travelers stimulate visitor economies once more? And how should businesses prepare? At the same time, has skyrocketing pandemic-era growth in eCommerce altered travel retail forever? If so, what new spending patterns could emerge?

Amid the current uncertainty, here are five factors to consider:

1. Charting domestic consumer spending

There will be a temptation to compare reopening travel retail activity with 2019, the last year for which measurable data is available. A more effective way to benchmark spending patterns soon will be to analyze domestic Asian markets in 2020 and 2021.

Scrutinizing vacation expenditure flows in markets that enjoyed strong domestic travel during the pandemic such as China, Vietnam, South Korea and Taiwan will help gauge the degree to which consumer sentiment is shifting either temporarily or long term.

Although, shopping priorities for domestic tourists tend to differ from when they travel overseas, analyzing local consumer markets can provide buying insights that are otherwise missing.

• Unlocking travel spend will require retailers to scrutinize realigned consumer attitudes and purchasing triggers during the pandemic
• Pre-COVID-19, domestic tourism was frequently overlooked as a guide to how travelers might behave and purchase when they take an overseas vacation
• eCommerce demand has grown and diversified and may continue while on vacation. Travelers may, for instance, use local shopping sites to buy daily use items

2. Watching the Hainan experience

China has proved to be a rare holiday retail hotspot in Asia during COVID-19. Hainan Island, which is China’s offshore duty-free shopping destination, has delivered impressive results since domestic travel reopened last summer.

Although visitors to Hainan from China fell 22 percent in 2020, there were still nearly 65 million visitors and sales of duty-free items increased by 127 percent from 2019. With COVID-19 under control, Chinese travelers are displaying more confidence to travel and shop using e-payment apps such as AliPay and WeChat Pay.

In the first quarter of 2021, Hainan recorded duty-free sales of RMB 13.6 billion, a spectacular 356 percent increase in the same 2020 period.

• To boost travel retail during the pandemic, China increased the annual tax-free shopping limit for its travelers visiting Hainan Island on vacation
• The enhanced sales cap helped expand the volume of duty-free sales and encouraged brands and retailers to unveil new products and promotions in Hainan
• Monitoring domestic trends are important as the proven spending power of Chinese travelers will likely drive retail competition once international tourism restarts

3. Innovating in travel shopping

While international travel has been on pause in most of Asia since March 2020, imaginative solutions have been tested to promote travel shopping. In South Korea, “flights to nowhere” by seven local airlines take off and return to the same Korean airport without landing elsewhere. However, each flight route crosses into Japanese airspace enabling passengers to purchase tax-free items at the airport as if taking an international flight.

We are also starting to see an acceleration of duty-free shopping beyond airport outlets. South Korea’s Lotte plans to open a duty-free store in downtown Hanoi in 2021, followed by Da Nang. This follows the opening of Lotte city outlets in Melbourne and Tokyo. Meanwhile, Da Nang plans to build an international duty-free zone to attract luxury shoppers and tourists, and bolster the visitor economies of nearby destinations like Hue and Hoi An.

• Introducing new duty-free formats will help cosmetics, fragrance, jewelry and drinks brands to tap pent-up “revenge spend” and breathe new life into travel retail
• Pre- and post-flight stores will likely diversify and regularly refresh their product ranges to tempt travelers to make in-the-moment purchases
• Offering duty-free shopping in downtown locations could generate more foot traffic and benefit existing retailers in the initial post-pandemic period

4. Making travel payments seamless

During COVID-19, Asian consumers have relied on smartphone shopping and payment apps. The frictionless safety of cashless transactions is here to stay. Ongoing development of digital currencies should also make it smoother and more secure for travelers to make touchless purchases while overseas.

As mentioned in our previous article five reasons why digital currencies will influence consumer behaviors , Cambodia, Thailand and Malaysia plan to standardize cross-border payments, and Thailand and Vietnam may introduce a QR code payment app for tourists from each country. Meanwhile, JPMorgan is trialing an international payments tool using Blockchain in Indonesia and Taiwan, and Vietnam’s e-wallet apps Sacombank Pay and Liên Việt 24h signed with Lotte Duty-free to help tourists shop without cash and enjoy customized promotions.

Offering digital payment options that are safe, secure and seamless are important for enticing Asian consumers to spend while traveling

Creative promotions incorporating elements of personal participation and gamification may help retailers and brands unlock latent travel spend

Asia’s digital wallet and e-currency landscape is changing fast, and retailers will need to adapt quickly to a dynamic and unpredictable cashless future

5. Buying into the travel experience

Despite widespread social restrictions, brand innovation has gained a new impetus during the pandemic with a focus on local consumers. The Made in Vietnam campaign has inspired young creatives from Hanoi to Ho Chi Minh City to launch stylish lifestyle accessories and organic products reflecting both local culture and people’s pandemic-era experiences.

In Indonesia, the Philippines and Malaysia, artistically branded product lines reflect the shifting zeitgeist. Meanwhile, international clothing and footwear brands are commissioning local artists to create uplifting designs for limited-edition releases. Social media advocacy may result in some of these innovations becoming coveted in the future by inbound visitors seeking “sense of place” shopping experiences.

Travel consumers will be on the lookout for unique, locally produced mementos that combine the culture and creative renaissance of their chosen destination

Gift giving is popular with Asian tourists and post-pandemic travelers will desire locally branded items launched during a time when travel overseas was not possible

Destinations boasting clearly defined brand appeal, such as whisky in Japan, cosmetics in South Korea and organic products in Australia and New Zealand, may experience strong travel shopping demand

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The Customer Experience Column: The principles of travel retail digital marketing

Welcome to the latest in a series of explainers on the acceleration of digital disruption in travel retail, by marketing, brand activation and customer experience specialist CircleSquare.

Continuing our series on the emerging travel retail strategic paradigm , the focus this month is on demonstrating both the opportunities and underlying complexity of travel retail by looking at three key aspects of the TR customer journey:

1) The TR digital & experiential shift

2) Trip Segment emphasis

3) Nationality mix by destination.

In our view these are vital areas to consider when planning sales focus & marketing investment in the channel.

The digital & experiential shift

Why invest at all? Last month we touched on the concept of TR’s traditional role as a “shop-window” for brands. One interesting effect of the pandemic has been that product discovery has become more important to consumers than price competitiveness, as m1nd-set’s February 2022 research release makes clear:

This is a consistent trend since the start of the pandemic. We would argue that covid-19 is a tipping point for travel retail, moving from being largely value-driven to an experience- and discovery-driven proposition.

Moving forward, brands that compete solely on promotion and value proposition will struggle, while those that invest in innovative online and offline experiential propositions are already starting to grow their market share both in terms of channel sales but increasingly by leveraging the first-party data acquired in TR to initiate local market sales and acquisition campaigns.  

Trip Segment Emphasis

A critical consideration for brands with regards to TR distribution and marketing investment planning is at what point of the full TR journey do they have the greatest resonance with consumers.

The below graphic gives a general view of which trip segment has the highest commercial relevance to the main product categories in the channel. It is intended to be no more than indicative and reflective of the global TR footprint, there are of course considerable regional variations (e.g. APAC and the historic importance of downtowns).

Understanding where your brand is strongest along the classic travel retail trip segments is key to determining where to invest both in terms of physical disruptions (e.g. in-store/activations) and digital media.

For example, take a sunglasses brand: most purchases in this category are made by consumers looking for a new pair of shades to wear on holiday. Investment in awareness and conversion campaigns would naturally fall in the outbound segment.

Conversely, for wines & spirits, most purchases are made on the inbound segment as customers are looking to bring back a treat to enjoy at home.

This in turn impacts the digital media planning, as engaging consumers away from their home market frequently requires a different set of publishers to ensure they can be reached effectively and cost efficiently.

Nationality Mixes by Destination

The final area of complexity when considering travel retail campaigns is the traffic mix and the number of destinations included in the campaign.

Let’s take a look at April 2022 for three cities: Paris, London and Dubai. Shown are all the nationalities arriving in these cites that generated 80% of the traffic for the period in question.

How do you effectively target all or most of these nationalities who are on different platforms, exhibit differing browsing behaviours and ensure that the content is adapted to the differing nationalities in question? This is a significant challenge and there is no one-stop solution or data partner who can help you reach everyone.

At CircleSquare, we aggregate a mix of leading and specialist data partners from every region to synthesise destination-specific audience pools – which can be more or less relevant to the brand in question.

Initiating a global traveller campaign with accurate reach requires planning across multiple platforms. Take the Online Travel Agencies (OTA) platforms: these vary in popularity between each region and while North America and Europe are relatively homologous, the popularity of OTA platforms differs significantly between each region.

Astonishingly, booking.com – the largest OTA by market cap – enjoys only 5.74% of all travel-related worldwide web traffic [1] , which points to the systemic fragmentation and extremely long-tail of the travel industry.

See one of our favourite publicly available graphics, showing the most popular social apps by state in the US in 2019 based on Similarweb and Google Search Trends data. Can you spot the App that didn’t feature then and is present today…? [2]

Most non-specialists assume that there is no significant regional variation in social app usage in the US, which is not the case. We find it fascinating that the region exhibits as much diversity as say, the Middle East or APAC.

So how do brands resolve these challenges? Primarily, they engage in data partnerships with specialist providers and make investments in establishing and growing their first-party data sets. Like many aspects of travel retail, the way this is leveraged in the channel is frequently counter-intuitive to how marketers and loyalty specialists go about leveraging these in local markets.

Well done if you have made it this far. We would love your feedback and to initiate a dialogue with you. You can reach us on this topic or any other here: [email protected]

[1] similarweb.com

*This article first appeared in The Moodie Davitt eZine. Click here for access.

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Retailers in travel: the power of shopping tourism

• February 26, 2020

The experience economy has driven changes across all economic sectors in recent years, and retail has experienced some of the most radical, yet interesting ones, opening new paths for business by interacting with other industries such as travel. Shopping tourism is showing its power as a business driver and, at the same time, it is pushing a deep transformation of the industry that will guarantee growth and development in the short and long run.

By Otto Ambagtsheer

As experienced retailers, there is a clear trend we are observing worldwide, aligned with the social changes that technology has brought: the increasing demand for unique and personalized experiences–a movement that has been called “the experience economy”. In the midst of it, e-commerce, with its competitive prices and fast delivery, is rewriting the rules of consumption; industries and sectors interact in a competitive race to be original and relevant in a market full of stimulant proposals, and this requires more collaborative initiatives to ensure traditional business models are able to successfully transition to an ultra-connected economy. A good example of these synergies is amalgamation of shopping and tourism, a segment that is growing exponentially around the world.

According to the World Tourism Organization (UNWTO), shopping is among the top deciding factors when travellers choose a destination, showing its relevance beyond that of a mere ancillary service. As 2019 data from UNWTO shows, more than 1.5 billion people traveled around the world in 2019, four percent more than in 2018 despite the travel industry turmoil following the collapse of Thomas Cook and several other low-cost airlines in Europe, and this entity foresees an increase between three and four percent in international tourist arrivals worldwide. Moreover, tourism spending in 2019 has remained strong against a backdrop of global economic slowdown. It continued to grow most notably amongst the world’s top ten spending markets surpassing the previous year’s staggering 1,500,000,000,000 dollars (one trillion five hundred billion dollars).

Range of special activities

These figures paint an interesting picture for travel retail, as the number of travellers grows every year, as does the total spend. Tax-free shopping helps to quantify the dimension of shopping tourism from markets outside Europe, especially when it comes to outlets, as the price factor is particularly appealing. Shopping is of course not confined to airports or malls and has become a key part of the travel experience.

VIA Outlets is in a good position to capitalize on this dynamic and expanding market segment with its eleven outlet centers, which are strategically located at the gateway of many of Europe’s most exciting destinations. Apart from getting the basics of a great shopping experience right–offering a wide range of high-quality brands, an extensive food and beverage offering, leisure areas for children and adults and aesthetics that inspire as well as encourage exploration of the retail offer–VIA Outlets undertakes a range of activities specifically targeted at tourists. For example, we continuously add facilities that purposely cater to tourists’ needs, such as shuttle bus services from and to city centers, as well as added-value services such as tax refund facitlies for guests from overseas and lounges for VIPs.

Shopping, like travel, is all about creating an experience that is unique and unrepeatable from place to place. Real integration of shopping in the travel experience means making retail accessible, locally relevant and convenient. To this end, our vision is to recreate, in an appealing way, each center’s regional architecture, decor, culture and history to differentiate our shopping destinations from our competitors’, and make it available, vivid and present throughout the travel journey–all with the aim of capturing the experience economy. We call this a “beautifully local” experience.

Beyond the mere act of buying

Broadly speaking, shopping tourism is undoubtedly an economic engine that drives direct and indirect employment, revenue and benefits for destinations. The mere concept is a combination of two global industries able to mobilize billions of euros. As we see it, shopping tourism is a transversal segment that interacts with other sectors, products and services, both in travel and retail as well as a number of other industries.

Fashion, just like travel, resonates with consumers’ aspirations and lifestyles, and this is the quintessence of the experience economy. The travel industry has experienced this transformation, from location to experience, long before retail; in fact, travellers’ choices have a deep, relevant, aspirational element, tied to emotions, that shopping also provides. That is why we see shopping tourism as a powerful combination, able to increase revenue for retailers, as well as boost longer stays, higher spending and loyalty ratios for destinations.

Moreover, shopping tourism goes beyond the mere act of buying: it starts at the very moment a traveller picks a certain destination, continues throughout their trip in different contexts, and even evokes that experience once they return home. Interestingly, according to the latest Duty Free World Council (DFWC) KPI Monitor, 75 percent of shoppers plan their purchases prior to their travels, and while the majority–52 percent–of shoppers who plan their purchases do so with a general idea of what they will buy, the remaining 23 percent plan their purchases with a specific product or brand in mind. So, being in the forefront of the traveller’s mind right from the inspiration and planning process is vital for all parties involved in this segment.

A diversification engine

What these figures demonstrate is that to really harness shopping tourism potential, travel and retail should work together. Shopping tourism is the result of the development, growth and evolution of the travel industry and travellers, who are eager to enjoy destinations from a local perspective. It is a global economic driver for both emerging and well-established destinations, that involves and requires the collaboration of players in both the travel and retail industry, as well as other economic sectors and public entities. Working together, we can create a compelling concept that truly reflects what makes a destination unique and appealing to travellers around the world.

Besides becoming one of the key motivators for travellers when choosing a place to visit, shopping tourism is also a strong, sustainable development force for destinations, which is able to contribute to local employment, businesses and the wider economy. It is a diversification engine for both retail or travel. For retail players, travellers revitalize demand and their visits to malls, urban shopping areas and outlets force innovation in products and services to really make a difference in our value proposition, helping to align our shopping experience with the idiosyncrasies of each location and providing a wide range of guest services, adapted to both locals’ and travellers’ needs and expectations.

Boosting the local economy

For destinations, hotels and travel agents, it poses an opportunity to recreate new experiences that are able to drive business and stays, attract alternative and more profitable inbound markets and ensure recurring visitations; but also to reorganize saturated urban destinations and boost the local economy from a long-term perspective. The stronger the shopping destination appeal of a location, region or country, the more visitors will come, and the less the area will be exposed to seasonality.

The most important challenge we face as travel and retail players, is that we have to ensure that travellers and their experiences are at the center of any strategy. Shopping tourism involves a wide range of companies, institutions and public bodies that need to understand each other’s goals, needs and dynamics to really develop shopping tourism to its full potential.

At VIA Outlets, we assumed such a commitment implies working hand-in-hand with the travel industry to develop shopping tourism destinations–as we are currently doing from Mallorca to Gothenburg, from Lisbon to Prague, from Zweibrücken to Landquart–and create industry standards that contribute to achieving this goal. We foster collaborative agreements with hotel companies as well as national and local accommodation associations through our tourism department to leverage natural synergies between travel and retail sectors, right across the travel value chain that have proven successful for all parties. In 2019, we further enhanced our capabilities in this field by hiring dedicated sales representatives in some of our largest non-European customer markets, notably China, the Middle East and Brazil. Our efforts proved successful as we saw a significant increase in tax free sales, amounting to a total increase of 17 percent. The figures were even stronger in especially strong tourist destinations such as Amsterdam and Lisbon, with figures at Batavia Stad Fashion Outlet and Freeport Lisboa Fashion Outlet seeing increases in this metric by 21 and 29 percent respectively.

One thing is certain: shopping is definitively becoming more important in travel spends, a trend that, combined with the outlet sector’s highly commercial force, offers a myriad of opportunities for destinations, investors, retailers, tourists and local guests alike.

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Privacy Overview

Travel Agency

A travel agent is a person who has full knowledge of tourist product – destinations, modes of travel, climate, accommodation, and other areas of the service sector. He acts on the behalf of product providers/principles and in return gets a commission. Technically, a travel agent is an owner or manage r of an agency, but other employees are responsible for advising tourists and selling packages tours/individual components of travel products.

A travel agent may be an individual /firm or corporation which is commonly known as a travel agency . An agency means the office of travel agent or organization where all travel goods and services are assembled and coordinated for the smooth conduct of travel agency business.

Travel agency is one of the most important organizations in the tourism private sector which plays a significant and crucial role in the entire process of developing and promoting tourism in the country or at a destination. It is a travel agency which packages and processes all the attractions, accesses, amenities and ancillary services of a country and present them to tourists. That’s why travel agency is known as ‘ image builder ‘ of a country.

A prospective travel agency is one which makes arrangements of travel tickets (air, rail, road, and sea); travel documents (passports, visa and other documents required to travel); accommodation, entertainment, and other travel-related services from principle suppliers. It may also secure travel insurance, foreign currency for traveling people.

History of Travel Agency

The first Travel Agency of the world was established by Thomas Cook in 1845 in England. The use of the term travel trade dates back from the early years of the 19th century, but this should not obscure the fact that what we today describe as travel trade (travel agency and tour operation business) was taking place much earlier in history.

Throughout history, there was travel middleman who helped the merchants traveling for trade and others who traveled for religious purposes.

In 1841 a fortunate day comes in the history of travel trade when Thomas Cook , as secretary of South Midland Temperance Association, organized a trip by a train for 570 members for his association to the distance of 22 miles. He bought railway tickets in bulk to sell them to people.

The experiment was successful and everybody was exultant. Mr. Cook had done his job on a no-profit basis. But, incidentally, It gave him a new idea and turned it into a tour business.

Four years later in 1845 , he set up a ‘ World’s First Travel Agency ‘ to organize excursions.  Due to this innovative approach, Mr. Thomas Cook is known as the Father of Travel Agency Business . He co-ordinated railway and steamship excursions throughout England, Scotland and Europe.

However, the railways only gave him a 5% commission which was not enough to meet his overheads, so he decided to diversify this business into tour operation .

In 1855 Mr. Cook started operating package tours . He conducted the world’s first international tour from England to Paris.

Types of Travel Agency

Travel agencies are basically categorized into two types-: Retail Travel Agenc y and Wholesale Travel Agency .

Retail Travel Agency

A retail travel agency sells tourists products directly to the public on the behalf of the products suppliers and in return get commissions. Some package tour is sold in two ways i.e., on a commission basis and mark up the price.

When a travel agency sells a tour on the marked-up price it means that first, it markup the cost of the tour and then sell it at a higher rate. The markup price is the difference between retail price and wholesale cost.

Definitions of Retail Travel Agency

According to Airlines Reporting Corporation (ARC) a retail travel agency is defined as ” a business that performs the following functions: quotes fares, rates, make reservations, arrange travel tickets and accommodation, arrange travel insurance, foreign currency, documents and accepts payments.”

According to SARC (1967), ” retail travel agency business consists of the activities involved in selling tourism products/services directly to the tourists and performs normal functions such as issuing air tickets, making accommodation and transportation reservation, providing specialized services, and accepting and making payments.”

The main source of the revenue for the travel agency is the commission received from the vendors. However, the rate of the commission differs from organization to organization an travel component to the travel component.

A travel agency receives appx. 95% of their revenue from the commission, and the remaining 5% from consultancy services and others.

Wholesale Travel Agency

These agencies are specialized in organizing package tours, which are marketed to the customers/tourists through the network of a retail travel agency or directly to the prospective clients ( if wholesale travel agency has a retail division). A wholesale travel agency purchases tourists’ product components in the bulk and designs tour packages.

Sometimes, a wholesale travel agency buys travel components from the vendor in bulk and resell them to other travel business originations.

Wholesale travel agencies assemble package holidays and sell them to clients through retail travel agencies. A typical package tour includes – air tickets, accommodation, and something other services may also be included in it such as entertainment, sightseeing, and sports activities, etc.

These packages are referred to as ‘package tours’ most of these tours include the services of escorts but a few are sold to people who wish to travel independently.

Now a question arises – How a wholesale travel agency generates profits?

Generally, a wholesaler receives volume discounts from the principal suppliers because a wholesaler might agree to purchase a large number of seats from a particular airline or reserve a large number of rooms at a particular hotel or resort.

Practically, a wholesaler who sells package vacations/tours is called a Tour Operator .  However, technically there is a difference between a wholesaler and a tour operator. A wholesaler who sells tourists products individually without assembling them into a package tour is called a Consolidator .

Mostly, these are specialized in particular product components such as air tickets, accommodation, and conferences, and conventions, etc.

Difference between Wholesale Travel Agencies and Tour operators

The wholesale travel agencies may offer or operate the package tours or may specialize in developing tours for inbound as well as outbound travelers. They are often referred to as tour operators , but these two essentially different:

• Wholesale travel agency does not sell directly to the public, while tour operators do sell directly to clients.
• A wholesale travel agency usually combines, assembles and contacts for existing travel services to formulate a new travel product she has his own one or more components of travel product i.e. ‘ inclusive tours.’
• Wholesale travel agencies are less inclined than tour operators to perform ground services i.e. handling agency or ground operators.
• A wholesale travel agency may deal with one component of travel product while a tour operator offers a variety of tour programmes.
• The size of the business is large in the case of tour operators in comparison to a wholesale travel agency.

Features and Importance of the Travel Agency

Travel agency plays an important role in the travel sector business. Some most important features and importance of the travel agency business are following as:-

• An important link between the clients and principal suppliers.
• Image-Builder.
• Ensures rapid travel services.
• Provider of authentic and reliable travel information.
• A social a continuous process.
• Establishes a good relationship with clients and vendors.

These are the most important features of the Travel Agency Business.

Functions and Services of Travel Agency

Today, Travel Agencies have been recognized as a vital component of travel and tourism and have become an integral part of the travel and tourism industry at globally. They account for more than 90% of international and 70% of domestic tourist traffic

Further, more than 60%  of all travel agency revenues are derived from business travel. Most travel agencies sell both commercial and leisure travel but there are many travel agencies that only specialized in one sector or the other.

The operation of each travel agency is based on the scope of its activities and organizational size. Here we discuss the functions of a large scale travel agency that performs all types of activities such as Retail travel agency, wholesaling and tour operations, etc. The main function of a large-scale travel agency are:

Travel Information

Whatever the size of a travel agency, it has to provide necessary travel information to tourists. A travel agency must give up-to-date, accurate, and timely information regarding destinations mode of travel, accommodation, sight-seeing, shopping, immigration, passport, visa, customs clearance and procedure, health and security rules, and various permits required to travel in particular areas, etc.

Itinerary Preparation

The term tourists itinerary is used to identify the origin, destination and all the stopping points in a traveler’s tours. It is a composition of various elements and designed after a detailed study of the market. Travel agencies prepare an itinerary for tour packages.

Airline Ticketing and Reservation

A travel agency sells a variety of tourism products. Airline ticketing and reservation is still a major source of revenue. Travel agencies perform a function of airline ticketing and reservation on behalf of various airlines.

Tour Packaging and Costing

Travel agencies prepare a tour package and sell them to tourists. The coasting and pricing of tour packages depend to a large extent on the ability of travel agents as to how effectively he is able to negotiate with the principal suppliers.

Reservation

It is a very important function of all types of travel agencies. A travel agency consistently makes linkage with the accommodation sector, transport sector and other entertainment organizations to reserve rooms, and seats in the cultural programs and transportation.

Travel Insurance

Some large-scale travel agencies perform additional functions to serve their clients. Travel insurance protects travelers against the person as well as baggage losses resulting from a wide range of travel-related happenings and problems.

Currency Services

Approved travel agency authorized by Govt. body provides currency exchange services to tourists.

Organization of Conference/Conventions

Large-scale travel agencies offer a complete convention/conference package which includes registration of the participants at the venue to be picked up for dropped to the airport/hotel, overhead projectors, slide projectors, TV, VCR, information counter, sightseeing, etc.

Travel Agency Linkages and Integration

Basically, a travel agency serves two types of clients: business travelers and leisure travelers. Incidentally, the requirements of these tourists are different and an agency has to assemble or purchase-related components from the principal suppliers to cater to their needs.

Essentially, travel agencies maintain close ties with Airlines, hotels, car rentals, banks, insurance companies, railways, government, trade associations, foreign tour operators and travel agents, ground operators, cruise companies, and tourism educational institutes.

What is Duty Free & Travel Retail?

Duty free & travel retail is a global industry that generated annual retail sales of us$ 86 bn in 2019 and encompasses the sale of goods to international travellers. duty free shops are exempt from the payment of certain local or national taxes and duties, normally with the requirement that the goods are only sold to travellers who will take them out of the country., the duty free and travel retail industry is sometimes confused with other channels. duty and tax free sales are not ‘cross border trade’, are not ‘duty not paid’ and are not ‘free zone sales’. duty free sales take place in a highly regulated retail environment governed by customs allowances, e.g. airports, ports, ferries, cruise ships and land border shops and their operations are governed by national customs authorities., products that can be sold duty free vary by jurisdiction and different rules based on duty calculations, allowance restrictions and other factors., airports represent the majority of such sales globally but duty free & travel retail is also available at border shops (under certain conditions, usually requiring the purchaser to spend a minimum amount of time outside the country), cruise & ferry shops on vessels in international waters, onboard aircraft during international flights, at some international railway stations and for the provisioning of ships sailing in international waters. it can also include downtown stores where proof of travel is required to purchase., in many states, and in certain international institutions, the right to buy duty free goods is accorded to diplomatic and military personnel stationed outside their native country. the duty free departments of many companies serve this market although it is not considered part of the mainstream duty free industry., some jurisdictions (for example in non-eu europe, australasia, the middle east and latin america) offer travellers the opportunity to buy duty free goods on their arrival at their destination airport within the territory concerned. in such places, arrivals duty free has become an important source of revenue for airports., in some territories, the term “travel retail” was coined to define the sale of products in a travel environment on which taxes and duties remain payable even though the customer may be travelling internationally. this is notably the case within the european union, where the sale of duty free goods to customers travelling within the eu was abolished in 1999., “travel retail” is a term that commonly refers to sales made in travel environments where customers require proof of travel to access the commercial area, but which are subject to taxes and duties., duty free & travel retail generates vital revenues for national aviation, travel and tourism industries. airports in particular increasingly rely on commercial revenues to fund the development of their infrastructure, and to help them keep the landing fees payable by airlines as low as possible. at airports across the world, retail is now the largest contributor to non-aeronautical income., the duty free world council has developed a certificate course in duty free and travel retail which gives students a comprehensive understanding of the industry, its history and evolution, an understanding of retail landscape, from its key players to its operating model. it explores the characteristics of shoppers in the channel, the main purchase drivers and barriers, and demonstrates best practice on how to drive sales and deliver the best shopping experience., to  enrol or for more information here..

Duty Free World Council 23-25 Rue de Berri 75008 Paris

[email protected]