Making sense of the Travel Retail industry: an interview with Melvin Broekaart, CEO, Aircommerce.

By: PM   •   email: info@trunblocked.com

PM: Melvin, in your feature ‘Growing the Pie’ for Airport World, December 2018 issue, you highlighted the need for far greater collaboration from all parties connected to a passenger’s journey. This steps outside the more traditional view of the Trinity – airports, retail operators and brands – being the key connectors. Can you briefly expand on who is involved and why the industry is failing to fully connect with its potential?

MB: The Trinity approach of working closely together to optimally target and serve the passenger’s commercial needs has been eye-opening over the past years. Yet it has simultaneously been overtaken by a new customer journey, where passengers are under the influence of many more stakeholders than before – before, during and after their journey – rather than just the Trinity threesome.

In today’s world, consumers deciding to travel are being commercially influenced from the moment they have taken the decision to travel until after their journey’s return. Search engines, online travel agents (OTA’s), hotel reservation websites, car rental companies, airlines, airports, retailers, suppliers, F & B operators, travel service providers and many more travel channel stakeholders are all competing for the passenger’s non-aeronautical spending power. Many of them buying, gathering, processing and, in turn, selling fractions of passenger data to optimise their individual share of passenger spend.

By limiting collaboration efforts to the Trinity – who themselves do not often share valuable data and insights – we, as an industry, are opening the gates to non-aeronautical passenger spend to powerful ‘third parties’ outside the TR domain and losing out on our share of commercial spend. Let’s start winning as a team and protect ourselves from losing as individuals.

PM: Good points. So how does the industry – specifically airports, airlines, retailers and suppliers – overcome the apparent mutual exclusivity between the parties?

MB: There is no mutual exclusivity from the passenger’s point of view! As a passenger you expect your (commercial) needs and desires to be fulfilled in the most convenient way possible, thinking of your journey as one integrated flow – not as an eco-system of internally competing partners. By upholding the elements that create the ‘apparent mutual exclusivity between the parties’, we are limiting passenger spend. Or indirectly pushing passenger spend into the hands of non-industry related stakeholders.

Every party has their own commercially very rewarding role to play with regards to non-aeronautical spend during the passenger’s journey. Maximum commercial value is only created by focusing on this role and allowing the other parties to excel in their respective roles by generous data sharing between parties.

PM: So, do you foresee a potential blurring of the dividing line, where major suppliers, for example, simply bypass the incumbent retailers and develop genuine experiential events with the airport’s own white space?

MB: Absolutely. And this goes for the usual suspects – let’s say the ‘traditional’ travel retail brands – as well as many global brands that have not yet fully exposed themselves within our industry.

The reason for this is that the future of travel retail is about so much more than just retail-as-we-know-it-nowadays! Traditionally the inspirational and the transactional part of retail have always taken place in the same space. Browsing and buying. However, there is no reason for today’s airside environments to force passengers to make a transaction in order to generate commercial revenue from them. The uniqueness of the airport airside environment is the obvious ‘captivity’ of the passengers. And when seeing the passenger as a consumer with – as a result of the ‘captive’ nature of things – an above average amount of time and attention for commercial offerings, a world of opportunities opens up to let the passenger experience extremely commercially valuable real-life taste, touch, try and testing moments. Major suppliers might well be able to optimally benefit from this by directly developing genuine experiential locations and events within the airport’s white spaces themselves. They can do this as they are able to leverage their airside activities as part of a broader – and not solely airport related – customer journey.

PM: Moving on, do you think that an omni-channel approach, like AOE’s om3 model currently applied to Heathrow, Frankfurt and Auckland airports, is the way forward for airports? Recent results would indicate that it is working, and working well.

MB: We encourage the innovation. We also believe that the omni-channel approach is a step forward. But, in reality, it’s only one step. A step which is grounded in the belief that it is – and will remain – a common sense activity for passengers to buy (luxury) products when travelling. Back in the day, this made absolute sense for passengers because of the considerable savings achievable and the uniqueness of products which were available at the airport. We all know that, due to e-commerce and globalisation, both of these
purchase reasons are subject to erosion. Certainly for passengers from a small number of nationalities, these two reasons – together with ‘authenticity’ – are still important purchase drivers. But will these remain when governments strive to redirect the hundreds of millions of overseas luxury spending to their interior markets via duty free on arrival and downtown duty free?

PM: What about the current duty free apps that are available? Do you think any of them would survive if airports were ready to take full charge of their own digital destinies?

MB: I may not be aware of every duty free app currently on the market, but having a few in mind I would find it difficult to imagine that these will still exist five years from now. However, the reason that these initiatives will fail is not completely tied to airports taking full charge of their own commercial destinies. Of course these app providers would certainly be weakened if airports did.

Providing passengers with a differentiating commercial offering matching today’s demands and a complete digital shell of information and interaction surrounding this offering is good, of course. But, in reality, a per-airport approach doesn’t do justice to travellers using at least two airports in one journey. Just imagine the amount of sites or apps passengers would need to have top-of-mind or on their phones. Real clutter.

So a multi-airport approach would make sense in some form. The current duty free apps offering this multi-airport approach nevertheless largely focus on providing the passenger with an overview of the pricing of available items, typically combined with the option to reserve or purchase. I strongly question the future of this kind of app within the travel retail environment when the competitiveness on pricing and assortment from the online giants will continue to rise strongly over the coming years. That is, until there will be little or no reason to pick up (luxury) goods at the airport when the online giants deliver direct to your doorstep.

PM: We have seen how great an impact the online giants have already had on high street sales. I read recently that 15% online equates to real damage to high street stores, and it’s at that figure now. Arguably the airport sector is more cocooned and it has been said that only when online reaches around 22%, in around 3 years time, it will have the same kind of impact. So future-proofing is key. Yet the problem with the airport business seems to be that it is too conservative, too slow to act and is entrenched in fixed business models. There is an increasing dependence of non-aeronautical revenues, but it’s this very source of income that is most under threat. There needs to more revolutionary thinking across the board. Some airports lead, of course, and walk the talk. Many don’t. What are your thoughts here?

MB: My thoughts are that the future of travel retail is not what it used to be. Certainly there are some that still think that continuing to do what they did will get them what they got. But with the traditional duty free purchase reasons eroding, there is no other option for future growth and prosperity for the travel retail channel than to start testing new value propositions and business models. I am convinced that the future of our industry is bright, but we need to start taking control of our own future.

PM: Aircommerce is currently working with a number of airports, including Schiphol, Changi and Dubai, three airports that have traditionally led the sector, particularly in the field of innovation. Can you walk us through the areas Aircommerce is involved with?

MB: Aircommerce is recognised as a valuable partner to airports, airlines, airport operators and brands.

The company’s daily operation is divided into three main categories: Advisory, Activation and Ventures. Our advisory team is involved in researching, consulting, lobbying as well as strategic change and/or developments. These projects are often ‘behind the scenes’. Our Activation arm is rapidly growing, and the work of this team can be seen by passengers at various airports. We are currently working on airport pop-ups, brand activations and related projects in the Middle East, Europe, Asia and the west coast of the USA. In all cases, Aircommerce is working closely with airports, airport media, operators and brands to create memorable experiences – both physically and digitally. We see that the deal size of projects is increasing and that airports are opening up to more forward thinking experiential marketing campaigns, which lead to impulse purchases and new revenue streams for both the airport and its operators.

PM: We are seeing a number of innovation labs popping up – some well funded, others less so. Many are just ‘me too’s’. What advice would you give them?

MB: Interesting question. Last year we started Aircommerce Ventures, as we wanted to be able to support forward thinking industry initiatives with the capital and expertise required to create impact – helping to shape the future of travel retail. Our independent role turned out to be very appealing for partners within the eco-system.

The first two investments in our portfolio are self-funded and carefully nurtured. We learned along the way that there was significant appetite from investors to leverage money with our expertise. Having said that, Aircommerce is on its way to officially form a sector-focused investment fund and we will make an announcement in Q3 of 2019.

So, to answer your question directly, our advice to any innovation lab would therefore be to equip themselves with adequate industry knowledge and a clear vision on the future.

PM: Your own work with Schiphol is impressive. How successful has the project been? How has it generated incremental revenue for the airport?

MB: We value the special relationship we have with Amsterdam Schiphol Airport. Their forward thinking ability and willingness to experiment has enabled us to realise various unique projects, generating substantial incremental revenue for the airport. Whether by realising barber shops or turning seating areas into furniture showrooms, or by creating the Snapfly airport photo booths – allowing thousands of passengers every single month to socially share their stay at the airport, while acting as a branded object pushing digital coupons into the hands of travellers – all that we do is different, is fun and adds value to the overall customer experience.

PM: What other projects have you got in the pipeline that the industry can look forward to?

MB: We are developing a global overview of available pop-up spaces at airports, are working closely with a number of airports on creating permanent pop-up areas, and we are continuously bringing brands to life through airport brand activations via our unique, one-stop, full service approach.

PM: One last question, Melvin. If there was one thing that you wanted the industry to achieve in the next 12 months, what would it be?

MB: It is said that the best way to predict the future is to create it. I would really want the industry to start creating its own future by adopting initiatives and practicing a test and trial mentality – before outside-of-industry players decide on the industry’s future for us.