Evolving Concepts

Evolving Concepts

Success with airport concessions requires a focus on customers, marketing, and the business relationship

BY John F. Infanger, Editorial Director

January / February 1999

TUCSON, AZ — The airport retail revolution continues to evolve, and as it does certain key aspects are emerging as critical elements to success. These include new marketing techniques for a changing customer base; new ways of looking at the airport-retail tenant relationship; and, ways of monitoring customer service and retailer performance.

Today's airline passenger may pass through several airports during the same day or week. Generating revenues from that potential customer is the goal of each retailer and airport along the journey. However, if each airport experience is identical, the capture rate will decline, say those in the business. The correct combination, it seems, involves offering "name" national brands interspersed with regional and local novelty specialties that offer a unique experience. Critical, too, is ensuring the customer has a positive experience along the way — which brings into play customer service feedback and retailer monitoring. And, how well airports and their retail tenants get along and conduct their business partnerships can ultimately dictate the end performance of retail at an airport.

That, in essence, is the overriding message of representatives from airports, retail companies, and consulting firms who convened here recently at the 9th annual Airport Concessions Analysis Seminar, hosted by Embry-Riddle Aeronautical University. Their mission: share experiences concerning airport retail — from the airport, tenant, and customer perspectives. Following are select highlights from their presentations.

The ’right blend'
To determine what the potential "right blend" of retail mix works best at an individual airport, realize that the customer can be a key indicator, comments Ruth Crowley-Jacinto, senior vice president for Universal Studios and a former lead retail executive for Host Marriott.

"It isn't all about rent, and you don't bank the highest bid," she advises. The path to increasing revenue retail streams is one laden with demographic details of passengers who use the facility, she says, and the recognition that purchases are being made more on a want than need basis.

"You have to seduce the customer," she explains. Merely adding additional space for retail at an airport doesn't guarantee sales; it also requires creating an environment that attracts customers to it. Rather than being a cloning exercise, says Crowley-Jacinto, airport retail in the ’90s calls for regional customization, and product mix that is both national and regional, and the availability of brand names which offer familiarity and help relieve the concept of over-pricing.

She adds that customers will make a decision to buy in 18-30 seconds, and thus must be quickly sold by being able to easily discern what's being sold. To "complete the experience," she adds, quality service must be in place.

Signage can serve as a facilitating device for airports anxious to lure retail customers, she says, by not only telling what is available but also where it can be found and how long it will take to get there. "Ten seconds away" can sound attractive to the stressed airline passenger.

James Adam with NBBJ Retail Concepts Group echoes the importance of incorporating brand retailers, but offers that building local and regional shops around a national brand such as Starbucks can increase sales "to help expose what's unique."

He also cautions that while airports have captured some of the retail sales in recent years from shopping malls, he fully expects mall marketers to fight back to recapture some of that lost revenue. In particular, malls are redesigning their facilities to be more interesting and fun for customers, adding things such as "street entertainment." Keeping an eye on these new innovative retail techniques should be an ongoing consideration for those responsible for airport retail marketing, says Adam.

One other item of note from Adam is that airport retailers shouldn't forget that employees who work within the airport complex also offer a vital customer base.

Bob Weinberg of MarketPlace Development says that centralization of retail activities can play a major role toward success. Create a central location with an attractive theme for retail, he says.

A good case in point, says Weinberg, is the new retail center at Philadelphia International Airport. There, a moving walkway is positioned on the backside of the retail center; however, rather than having walls separating the two, large windows allow passengers on the walkway to peer into the shops. "It begins to get them in the mood," he explains.

Business Partnerships
One of the most critical aspects of the airport retail revolution that usually becomes evident rather quickly for newcomers is that with this entirely new approach toward selling to passengers comes the demand for a new way of conducting business between landlord and tenant. It is why the concept of "business partnerships" today is pervasive in any discussion about airport retail.

Says, Crowley-Jacinto: "Taking risks is critical to success." Thus, adjust or risk rents based on the potential for more sales.

Adds Weinberg: It's not a matter of getting the retail contract and then moving on to other airport issues. Airports must continually monitor and change the retail experience, working hand in hand with tenants all along the way. Unfortunately, he adds, airports are generally understaffed to do this.

Meanwhile, Tom Wilke of Orlando International Airport says that one of the responsibilities of the airport in the partnership is marketing to airlines and passengers. He says that his airport budgets some $1.3 million annually for this. Also, his airport adjusts minimum rents based on shop location to traffic flow. It's also the responsibility of the airport to provide a timely review process of retailer performance, he says.

Wilke says that concessionaires have the responsibility to provide quality goods at reasonable prices; clean, well-maintained facilities; and a courteous and well-trained staff.

A key to getting the partnership off on solid footing, says Wilke, is for the airport to keep the costs of proposals down. Ask for simple proposals without elaborate artistic renderings, he advises — "just a simple floor plan and an explanation."

Jeannie Raikoglo of the aviation properties division of the Port of Portland (OR) defines partnering as mutual expectations, mutual understanding, and mutual goals. If problems arise, she says, airports need to listen to the tenant, look at all the facts and how they compare to situations at other airports, and be creative in finding a solution. Tenants, meanwhile, need to be fully prepared, present a full picture ("open books, etc."), and also be creative.

For example, explains Raikoglo, if sales are below expectations, the first thing a tenant asks for is the last thing an airport will give: rent reduction. Besides, she says, such a move won't resolve managerial or operational issues if they are the problem.

A common experience, she and others point out, occurs when the retail tenant is new to the airport environment and has not yet fully adapted their operation. Case in point #1: One concessionaire was losing customers because they had to wait too long in line; the "calling numbers" system it used off-airport was unacceptable to airport customers. Case in point #2: A concessionaire failed to lure passengers into the shop. A shop facelift highlighting exactly what was being sold helped solve the problem. In both instances, an outside "objective" consultant was brought in to unmask the problem.

Finally, Pamela Del Duca with the Del Star Group, a Phoenix-based concessionaire, offers the following advice to airports:
• Avoid "analysis paralysis" via too heavy handed paperwork and reviews by committees, commissions, and contracts.
• Set a clear agenda.
• Respect individuality — "Allow me to be a creative retailer."
• Offer fair contracts with shared risks.
• Consider offering "one stop shopping" for retailers for setting up the contract.
• Don't define architectural parameters without concessionaire involvement.