Understanding Airport Retail

Nur is an Associate for Larisa Ortiz Associates

Dubai Airport Duty Free Shops.
Photo: Simon Chapman

The holiday season is upon us and many of us are taking trips home to spend time with family or vacationing on a beach somewhere. We join the millions of airline passengers around the world passing through airports and spending money on souvenirs, last-minute toiletries, and even food and drink while waiting for departure. The number of passengers flying has risen every year since 2009. According to the U.S. Department of Transportation, U.S.-based airlines carried a record 823 million passengers last year, up from 798 million in 2015. 

If you’ve only traveled to a handful of airports in the US and have only ever seen a Hudson News stand or Applebee’s restaurant, you’re likely wondering, “What’s so great about airport retail?” Well, on the whole, airport retail is doing much better than main street retail. Around the world, airport retail sales rose 4 percent in 2016 and is expected to reach $90 billion by 2023, according to Credence Research. In the US and Canada alone, airport retail is expected to rise to $10 billion by 2020 from $4.2 billion in 2015.

When we take a closer look at specific retail categories, some stores in airports appear to be experiencing better sales than their main street counterparts. The most obvious examples are of course the newsstands/ book stores, electronics/ gadgets, and specialty gifts/ souvenirs stores. These are all last-minute goods that travelers have often forgotten to pack or are looking for as gifts for loved ones back home, and have virtually no other option except to purchase right before boarding a flight at the airport.

High-end Harrods Department Store at London Heathrow
International Airport. Photo: Henry Burrows

Another retail category that is also doing very well in airports in recent years is ‘Clothing and Accessories’ – particularly that of luxury brands. Last year, clothing and accessories accounted for more than 50 percent of revenue share in the global airport retail market. The luxury lines of clothing and accessories, in particular, are meeting the preference and style of a large share of affluent travelers who are willing to spend more with their high disposable incomes. Today, luxury retail is booming in ‘hub airports’ that have a large number of connecting international flights. Terminal 3 at Singapore’s Changi Airport, for example, features a wide range of upscale boutiques and brands such as Bottega Venetta, Burberry, and Gucci. 

With such a large share of the retail market, it’s important that cities and governments (typical owners of airports) take time to understand airport retail and its various customers in order to enhance the experience of retail in these unique microclimates.

The Three Main Types of Airport Retail Customers

First, and most importantly, there’s the traveler. Travelers, as you might have already guessed from personal experience, are looking for a wide range of goods – from the unwieldy ‘replacement item’ to the seasonal and trendy souvenir or gift.

To make things even more complex for airport retailers, even within this customer segment of travelers, there are various subsets of travelers – the business traveler, the vacation traveler, the domestic traveler, and the international traveler – with wide-ranging needs, price points and consumer preferences.

The most lucrative consumer market, however, appears to be the growing group of travelers with high incomes, travelling for business and travelling internationally. These consumers are seeking exclusivity in products and are not heavily affected by price points.

Regardless of type of traveler, one thing remains constant – they all have limited time to browse and they are also captive foot traffic from post-security point on. Often, travelers dwell between 60 to 90 minutes in the airport from check-in to boarding and, according to a DKMA report, passengers who spend more than 60 minutes at the airport are +33% more likely to buy F&B, +27% more likely to buy retail and +13% more likely to buy duty free than passengers who spend fewer than 60 minutes at the airport. It is therefore important that airport retailers are strategic about merchandising and store layouts to maximize customer attention.

The second airport retail customer is the airline crew or airport staff. Growing up with both parents in aviation meant that I was always getting stuff purchased at airports – my mother would sometimes buy take-out dinner after work from the restaurant in the airport or get groceries from the convenience store at the airport – this was all regular to me. But think about the thousands of employees who come in and out of airports daily for work and need affordable and convenient meals throughout the day and last minute grocery!

Finally, the family member picking up and dropping off travelers make up the final key group of airport retail customers. These customers are looking for balloons and flowers to greet their loved ones or a final meal with friends before sending them off. Many airports in the US don’t offer more than a Starbucks and diner in the departure level and almost no retail at arrival level. This is a large chunk of airport customers whose needs are being ignored.

Best Practice: Asia-Pacific

In Asia- Pacific, the picture is different. Airports are already being designed with shopping as a key use for travelers, airport/airline staff, and for the general public. After all, retail accounts for approximately 30 percent of non-aviation revenues made by airports so why not maximize the benefits?

Today, Asia Pacific is leading the growth for airport retail, according to Bain & Company. In the region, it is common to see large international airports there with edutainment options, family-friendly restaurants, and even convenience/grocery stores for the families and friends waiting in departure or arrival halls. It is no wonder that it is the largest regional airport retail market accounting for 41 percent of revenue share in the 2015 global airport retail market.

The Slide at Terminal 3 Singapore Changi International Airport.
Photo: LittleDayOut.Com

In Singapore, Changi International Airport features two full-service Fairprice grocery stores and ‘Family Zones’ equipped with children’s playgrounds and giant slides. These amenities are used year round not just by families in transit to another destination but also families waiting on loved ones to return on a flight. With over 400 retail and service outlets and 140 food and dining options across approximately 979,515 square feet, the whole gamut of airport retail customers are easily able to find goods and services for any time of the day and year.

Hong Kong traditional street fare at the airport. Photo: Joe Allen

In Hong Kong, traditional Chinese and Hong Kong style coffee shop eateries are located across both terminals for both travelers to sample traditional cuisine on the way to their next destination and locals to enjoy a quick and affordable meal. Amongst their entertainment options, travelers and the general public can count on an aviation discovery center, IMAX Theater and simulation golf facility to pass their time at the airport.  

Challenges of Airport Retail

Getting airport retail to reap full benefits from its captive audience, however, requires a lot of upfront investment. Airport regulations requires that a lot of retail inventory may be subject to checks. There are also often no truck bays for easy delivery access, especially in older airports, which means retailers spend more time and money transporting their goods to the store. Not to mention the higher staff salaries that go into operating stores that must remain open at least between 7am and midnight. Alan Gluck, chairman of Airport Economic and Concession Consultants, reports that airport retailers have annual operating hours that are twice that of a similar storeoutside of an airport.

Tenant improvement costs are also often high as retailers are required to scrap all interior fit-outs at the end of each lease term, leaving new retailers with a new canvas to completely design and build from scratch.

Support Airport Retail

Airports play an important role in economic development. In a 2012 CityLab article, Richard Florida called out two studies that found associations between airport passengers and both metro population and employment growth, while controlling for other factors that would be expected to shape growth. In a study by economist Jan Brueckner, a 10 percent increase in passengers in a metro area was found to generate a one percent increase in regional employment. It is therefore incredibly important to boost the sources of revenues for airports in order to ensure their sustained performance and retail, as it turns out, is the leading or second biggest source of revenue for most airports.

Airport Express Train at Hong Kong International Airport.
Photo: Fabio Achilli

Firstly, the airports in the U.S. need to start competing with those in other regions like Europe and Asia-Pacific in terms of tenant mix, merchandising and price points. Travelers have wide-ranging needs and preferences, and airport retail needs to be able to cater to these various groups. In addition, the needs of the general public and staff working for airlines and the airport itself also need to be accounted for. In Singapore, the Changi International Airport sees its affordable food courts and eateries packed to the brim daily at lunchtime with employees working for various airlines or even families with children after school. This also likely due to the strong public transit connections between the airport and residential neighborhoods and downtown Singapore. Most residents across the country are able to get to Changi International Airport in less than an hour by public transit (cab, bus, mass rapid trains), and likewise in Hong Kong.

Secondly, like its counterparts on Main Street, airport retail also needs to up its omni-channel game in order to remain relevant and competitive amongst the traveler market. Many airports in Asia-Pacific are working on mobile apps with maps that help travelers navigate the building once they get there so that they can save time on browsing stores to visit and meals to purchase. Airport retailers are also allowing travelers to use their store apps to order food or items online before having them delivered directly to boarding gates, or partnering with airlines to enable click-and-collect service via inflight e-tail.

The airport is a truly complex micro-climate of retail that many cities and governments need to be more active in understanding. There is a large untapped potential in raising revenue for airports through retail and as owners of airports, municipalities are well poised to help bolster the retail environment for travelers, airline workforce, and the general public.

Retail in Coastal Towns

The season for sun, sand and sangria is upon us. As families and young professionals along the coast flock to the nearest beach towns for weekends or even a few months, retailers are also following suit. The latest trend in these coastal summer towns is the clustering of pop-up retailers and restaurateurs that have already established themselves in the nearest metropolitan city.

In Montauk and the Hamptons, for example, we’re seeing brands and restaurants that we’re already familiar with here in New York City. In a 2017 Hamptons Guide released by Guest of a Guest, a NYC lifestyle site, more than half of the featured retailers and food and drinking places were outposts of NYC stores. Arbor, for example, an outdoor bar and dining area has reportedly returned to Montauk for a second summer. It is run by Den Hospitality and is an expansion of the Manhattan bar The Garett. Likewise with Eleven Madison Park Summer house, the outpost of Eleven Madison Park restaurant by Michelin-starred Chef and Co-Owner Daniel Humm. In apparel, go-to women’s summer clothing brand The Reformation opened this season in East Hampton. Here in NYC, it has stores in neighborhoods like the Lower East Side and SoHo.

These retailers unfortunately are driving short-term leases in these coastal summer towns through the roof and while this has been helpful for property owners and landlords that struggle in seasonal markets, the retailers disappear after Labor Day for the next 8 months leaving empty storefronts… and less-than-happy residents.

We all know that coastal summer towns are popular areas for second homes and while this leads to high housing vacancy rates*, they also often affect the retail and commercial markets. When the part-time population leaves the coastal summer town for 8 months of the year, the full time live-in population left behind can barely support the retail square footage that is available in town. On a visit to Montauk on a surprisingly warm weekend in April, I was welcomed into town by closed or vacant storefronts being renovated for summer tenants. I could not imagine being a resident of Montauk in the autumn and winter months with almost no retail offerings available on Main Street. (Of course, the picture is much different now in the middle of July.)

To make matters worse, seasonal customers often have very different lifestyle preferences, median incomes, and median ages than the live-in residents, which results in a segmented market demand in these coastal summer towns. This means that retailers that are solely attracted to coastal summer towns for the trendy young summer customer may often overlook the needs and preferences of the live-in residents –driving an even greater divide between the customer groups. A quick look at the demographics of Montauk NY, Chatham MA and Block Island RI, all popular coastal summer towns, quickly showed that live-in residents in these places are much older, more car-dependent, and more traditional in taste and “stick to the brands they know” (not exactly the experimental pop-up brand supporter).

Furthermore, live-in permanent residents by default need year-round convenience goods and services versus temporary art galleries or summer clothing stores that strive to entertain the visitor for a couple of weeks. Balancing the retail mix in these towns is hard but when retailers follow migratory habits of customers, it is often the resident that loses the battle.
The light at the end of the tunnel for these coastal summer towns, however, lies with the abundance of experience-based businesses. Food and drinking places, personal care service facilities, indoor fitness studios, and entertainment venues still make up the lion’s share of the retail mix in these towns and for the most part they stay through the year.

These businesses support the tourism and accommodation sectors, and more importantly contribute to an overall experience of relaxation and retreat that even residents crave on weekends. Through rain, shine, or snow, the live-in residents continue to eat, drink and play at these coastal towns’ niche seafood restaurants and indoor fitness studios. In Montauk, even Gurneys Resort and Spa has introduced indoor stand-up paddleboard yoga in the heated seawater pool of the hotel available in the cool seasons.

The experience-based businesses certainly are more apt to modify their services and amenities in these seasonal coastal towns and certainly can sustain the vibrancy of the towns year-round. The coastal towns themselves however need to ensure that their zoning codes and ordinances are supportive of such experience-based businesses especially when new and innovative indoor activities are introduced along commercial corridors of these towns that may not be an allowable use in the ordinance, such as yoga studios or art studios. In fact, in East Hampton, residents have complained that restrictions on establishments that serve food or drinks have dampened the opening of the more experience-based restaurants on Main Street.

In light of the constantly changing retail environment of coastal summer towns, flexibility for retailers is important. Outdated land use restrictions – particularly those that prevent businesses from testing new concepts and incorporating new offerings – limits the ability of retailers to diversify their revenue streams in the cooler seasons and to meet the demands of the year-round live-in residents of these coastal towns. 

Support Your Local Artists This Holiday Season!

We're all gearing up for the holidays and of course buying gifts has become part and parcel of the season. Although looking for various types of gifts for all the different people in our lives has become less stressful and made easier with department stores and shopping malls offering a wide range of products, artisanal holiday markets have become the new hub to do this same type of cross shopping.


In New York, holiday markets are sprouting up all across the city - indoors and outdoors - and offering customers carefully-curated and unique shopping experiences filled with independent vendors selling an eclectic array of goods. A few weeks back, I stumbled upon Ridgewood Market Holiday Night Bazaar inside a German beer hall in the burgeoning neighborhood. Although the indoor market was discreetly located and inconspicuous, within 45 minutes I was armed with gifts for everyone on my list and not only did I spend much less than I would have at Bloomingdale's, I also got gifts that were handmade and one-of-a-kind.


This community-based artisan market, for example, features over 40 local artists who live or work within the neighborhood and that night all of them were out selling their products in person. There were ceramic pieces carved by hand in a nearby studio, metal jewelry mixed locally, and even honey harvested in local backyards. The truly engaging shopping experience that artists/vendors at such markets are able to offer is also special as many are able to speak eloquently to the process and inspiration of each product being sold.

As more research begins to point to the importance of maintaining physical retail presence and creating compelling shopping experiences to attract millennial shoppers, these holiday markets are certainly doing a great job offering millennials the stories they seek and the opportunities to touch, feel and test products.

Most importantly, this type of local and artisanal market is also fast becoming an outlet for artists, or aspiring small business owners, to test their products on the market and start building a customer base at a particularly crucial time of the year for retail. So for those of you who are still struggling to find the perfect gifts for all the special people in your lives, visit your neighborhood artisanal holiday market in your beer hall, church, or park, and support the local artists and aspiring business owners living amongst you!

Check out amNY and TimeOut New York for their lists of holiday markets in NYC!

Fulton Area Shoppers Prefer Bike Over Car

We're always talking and writing about bike-friendly business districts, so we were pleased to see coverage from Streetsblog of biking on Fulton Street in Fort Greene and Clinton Hill where we recently wrapped up a retail market study for the  the Fulton Area Business Alliance and Pratt Area Community Council.

image: cityinajar.com

On street parking is so coveted by business owners that the shear thought of removing the spots for bicycle infrastructure such as protected bike lanes or public plazas sends many into panic because those spots are often assumed to be directly associated with increased business and revenue. The findings of a recent study may help to calm business owners' nerves. The FAB Alliance and the Pratt Area Community Council surveyed 477 people on Fulton Street this summer and found that the vast majority of shoppers arrive without a car. 

Image: FAB Alliance and Pratt Area Community Council

The results of the survey show that only 15% of respondents used an automobile to access Fulton Street to shop, which is even less than those that typically bike to the area to shop (either by their own bike or CitiBike). This may be an isolated set of data but it adds to the growing strength of argument toward bike-friendly and multi-modal business districts.

A 2011 study by Kooshian and Winkleman, "Growing Wealthier," notes market trends now favoring mixed-use, walkable and bikable town centers and neighborhoods. They also note that businesses profit from bicycle and pedestrian facility improvements, time savings, and healthcare cost savings, referencing Gotschi's “Costeffectiveness of Nonmotorized Transportation Investments as a Greenhouse Gas Reduction Strategy.” 

image: nydailynews.com

The point to drive, or in this case walk or bike, home here is that with a growing number of shoppers walking and biking, car-centric streets could be a thing of the past.