In my previous post we discussed a logical approach towards developing most attractive retail. Now let us go one step further. In this post I shall discuss allocation of retail space at the airports.
In a number of airport development projects has looked at ways of Combining passenger flows in multi-terminal scenarios. For eg. Toulouse airport was advised to combine the flow of passengers in a new Terminal 3 with those in the existing Terminal 2 through one central security area, and to construct larger commercial facilities for nearly 4 million passengers, rather than two smaller facilities for a split passenger flow.
This will enable the airport to minimize the amount of duplication on offer to give greater choice to all passengers. A similar scheme is under construction in Hamburg, with agreement reached on an Airside Shopping Centre located between Terminals 2 and 4, to combine the flow of passengers into one focused shopping environment.
Once the location and size of the shopping area has been determined then the Merchandise mix must match the needs of the terminal user. For example, business users will be attracted to stores that serve their everyday needs -- electricals, business clothing, business gifts, toiletries, books, etc.
There have been cases were airports have an excellent wine shop, with a wide choice and compelling displays but unfortunately, the store was located in a predominantly domestic terminal, where passengers could source wine far more cheaply in downtown locations. Whereas, the international passengers were directed from a completely different terminal. As a result the income of the outlet was poor. Thus the relocation of the store could have increased sales by two or three folds.
Finally, The design of the commercial area and stores can have a real impact on passenger spend levels. If possible, avoid straight lines for shop fronts, and ensure that the building structure does not obscure sightlines. Curved shop frontages help to improve visibility into shops, and allow airports to develop stores of varying sizes and depths to meet the differing needs of their retailers.
Clear signage for shop fronts is also important. Within guidelines, retailers should be allowed to develop their own shop fronts, signage and treatments. This will add excitement to the shops and ensure that a row of shops is not just a line of uniform, monotonous frontage. While it is important that the architecture of the airport building is treated sensitively it must not be allowed to dominate the shopping area.
The landside development at Zurich Airport was very architecturally led, with a key requirement being the introduction of natural light to the area. In addition there are several escalators passing through the commercial area, which already existed for passenger processing to and from the railway station. Curved frontages ensured that visibility of all retail units was optimized regardless of where a potential customer enters the space, and the oval shape of the retailing means that people can easily get an overview of the complete offer.
In an ideal world, airports should be branded to express their different personalities and cultures. This will make airports different, interesting, appealing and enjoyable, and give airports back the buzz and excitement that has gone missing in some cases.
Ultimately, the reason for going to an airport terminal is to have an experience appropriate to your needs and expectations when catching a flight, when meeting or saying goodbye, just having a look, or because you work there.
To end, one can go full circle and return to the opening theme of money. How much do you want to earn from
your passengers?
Consider the example of a theoretical airport with 10 million passengers per year, of whom 5 million are departing and will have access to airside retailing.
If you get it slightly wrong, you may achieve a conversion rate of passenger to buyer of 30 per cent with an average transaction value of $30. This leads to sales of $45 million per year. If a rental income rate of 15 per cent is applied to this then the airport will achieve revenues of $6.75 million in one year.
On the other hand, if an airport gets it right then it should be possible to achieve a conversion rate of 50 per cent, with an average transaction value of $50. This would generate sales of $125m. Applying the same illustrative rental rate the revenue to the airport would be $18.75m, a difference of $12m per year -- with the addition of very happy customers.
I would welcome all valuable suggestions and discussions from the viewers. Together we can enhance the learning potential.
In order to determine the amount of retailing space and its location it is necessary to ask such questions as:
1. What will the conversion rate ( Ratio of the number of sales transactions to number of footfalls) and spending level be by passenger type?
2. What target level of space productivity do we want to achieve?
3. What are the flow routes of passengers through the airport, and where do they dwell?
4. Where are the key parts of the passenger process located in relation to the commercial zones?
5. Can we change the flow of passengers in order to be able to create more focused commercial zones?
It is important to Understand passenger flows clearly. In an ideal situation, we would try to ensure that 100% of passengers pass 100% of the commercial facilities, particularly those located airside.
1. What will the conversion rate ( Ratio of the number of sales transactions to number of footfalls) and spending level be by passenger type?
2. What target level of space productivity do we want to achieve?
3. What are the flow routes of passengers through the airport, and where do they dwell?
4. Where are the key parts of the passenger process located in relation to the commercial zones?
5. Can we change the flow of passengers in order to be able to create more focused commercial zones?
It is important to Understand passenger flows clearly. In an ideal situation, we would try to ensure that 100% of passengers pass 100% of the commercial facilities, particularly those located airside.
In a number of airport development projects has looked at ways of Combining passenger flows in multi-terminal scenarios. For eg. Toulouse airport was advised to combine the flow of passengers in a new Terminal 3 with those in the existing Terminal 2 through one central security area, and to construct larger commercial facilities for nearly 4 million passengers, rather than two smaller facilities for a split passenger flow.
This will enable the airport to minimize the amount of duplication on offer to give greater choice to all passengers. A similar scheme is under construction in Hamburg, with agreement reached on an Airside Shopping Centre located between Terminals 2 and 4, to combine the flow of passengers into one focused shopping environment.
Once the location and size of the shopping area has been determined then the Merchandise mix must match the needs of the terminal user. For example, business users will be attracted to stores that serve their everyday needs -- electricals, business clothing, business gifts, toiletries, books, etc.
There have been cases were airports have an excellent wine shop, with a wide choice and compelling displays but unfortunately, the store was located in a predominantly domestic terminal, where passengers could source wine far more cheaply in downtown locations. Whereas, the international passengers were directed from a completely different terminal. As a result the income of the outlet was poor. Thus the relocation of the store could have increased sales by two or three folds.
Finally, The design of the commercial area and stores can have a real impact on passenger spend levels. If possible, avoid straight lines for shop fronts, and ensure that the building structure does not obscure sightlines. Curved shop frontages help to improve visibility into shops, and allow airports to develop stores of varying sizes and depths to meet the differing needs of their retailers.
Clear signage for shop fronts is also important. Within guidelines, retailers should be allowed to develop their own shop fronts, signage and treatments. This will add excitement to the shops and ensure that a row of shops is not just a line of uniform, monotonous frontage. While it is important that the architecture of the airport building is treated sensitively it must not be allowed to dominate the shopping area.
The landside development at Zurich Airport was very architecturally led, with a key requirement being the introduction of natural light to the area. In addition there are several escalators passing through the commercial area, which already existed for passenger processing to and from the railway station. Curved frontages ensured that visibility of all retail units was optimized regardless of where a potential customer enters the space, and the oval shape of the retailing means that people can easily get an overview of the complete offer.
In an ideal world, airports should be branded to express their different personalities and cultures. This will make airports different, interesting, appealing and enjoyable, and give airports back the buzz and excitement that has gone missing in some cases.
Ultimately, the reason for going to an airport terminal is to have an experience appropriate to your needs and expectations when catching a flight, when meeting or saying goodbye, just having a look, or because you work there.
To end, one can go full circle and return to the opening theme of money. How much do you want to earn from
your passengers?
Consider the example of a theoretical airport with 10 million passengers per year, of whom 5 million are departing and will have access to airside retailing.
If you get it slightly wrong, you may achieve a conversion rate of passenger to buyer of 30 per cent with an average transaction value of $30. This leads to sales of $45 million per year. If a rental income rate of 15 per cent is applied to this then the airport will achieve revenues of $6.75 million in one year.
On the other hand, if an airport gets it right then it should be possible to achieve a conversion rate of 50 per cent, with an average transaction value of $50. This would generate sales of $125m. Applying the same illustrative rental rate the revenue to the airport would be $18.75m, a difference of $12m per year -- with the addition of very happy customers.
I would welcome all valuable suggestions and discussions from the viewers. Together we can enhance the learning potential.
