The Changi Airport in Singapore, repeatedly hailed as one of the best airports in the world, has over 300 retail stores, including those of popular brands such as L’Oreal, Estee Lauder and Burberry.
One of them, the Shilla Duty Free Singapore, saw sales contribution of fragrances and value-based skincare products to total revenue double between 2019 and 2024 as travel recovered after the Covid-19 pandemic and high spending passengers from countries like India, South Korea and China visiting or passing through the island.
Jesus Abia, managing director of L’Oreal Travel Retail Asia Pacific, was quoted by The Straits Times as saying travelers from India and Southeast Asia show more interest in fragrances, while South Koreans and Chinese prefer skincare products.
“The beauty industry is a resilient one, having grown non-stop for the last 20 years, even through the Covid-19 pandemic.
“It demonstrates that there is an appetite and need for beauty, and this is the right moment to reshape the travel retail business.“
Analysts expect the double-digit growth in the global travel retail market will drive up spending at airport shopping outlets.
The market is expected to surpass US$100 billion in value this year, a 13.5% jump from last year, according to Indian research firm The Business Research Company.
Between 2025 and 2035 the airport retail market is projected to grow at a compounded annual rate of 11.2%, driven by the rise in passenger traffic, increasing demand for duty-free shopping and ongoing enhancements in airport infrastructure globally, U.S. research firm Future Market Insights said in a recent report.
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A customer looks at items at a shop in Changi Airport, Singapore. Photo courtesy of the airport |
“Airports are evolving into multifunctional travel hubs, offering a diverse range of services and experiences. These include not just shopping, but also entertainment, dining, and leisure activities, all of which contribute to improving the overall passenger experience.”
The U.S, with high passenger traffic and major international hubs like New York, Los Angeles and Miami, is expected to see its airport retail market marginally exceed the global average.
The U.K., the E.U., Japan and South Korea are projected to grow by around 11% annually in the same period.
Another continent that is likely to see a surge in spending at airports is Africa.
Lagardère Travel Retail, the world’s second largest airport retail operator, recently tied up with a South African tourism firm to expand to its seventh country on the continent.
It operates a global network of 5,000 stores in more than 50 countries, generating US$6.1 billion in sales last year for its France-based media-to-retail parent, Lagardère Group, according to Forbes.
The investment was announced amid a rapid growth in Africa’s air travel retail industry, fueled by increasing passenger numbers, airport expansions and rising demand for duty-free and convenience shopping.
The travel retail market in Africa and the Middle East is valued at over US$3.5 billion, with South Africa alone estimated at more than $100 million.
African duty-free and travel retail sales are projected to reach US$841 million in 2024.
Rethinking retail
Some analysts believe that the speedy expansion in airport retail could in fact be faster.
Lynda Wee, an adjunct associate professor at Nanyang Business School, sees transit passengers in Changi Airport as an untapped travel retail market.
“The size of airports is increasing and you start to see more transit and transfer passengers,” she told The Straits Times.
“They are time-rich, and when they are stuck in a location for a good few hours, they may be more open to what brands have to say. There’s a lot of scope to rethink retail.”
But retailing should be more than just selling products, and companies need to invest heavily in branding to ensure that the stories they tell remain in the minds of airport passengers even after their departure, she said.
“At the airport, if it is merely a transactional shopping experience, brands cannot go very far.
“But if they are able to tell a story of who they are and why travelers need to get products there and then, then the shopping experience does not stop there. Even after they leave the airport, they will still look for these brands online.”
Industry insiders also call for stronger initiatives to increase collaboration between retailers and airport operators to improve the customer experience.
Abia said the way forward for travel retail is with five-way “pentarchy partnerships,” which bring together airlines, airports, retailers, brands, and media partners to deliver a personalized journey for the traveler.
“One of the challenges we have had in this industry is that we have been working in silos. It worked because business was good and air traffic was growing, but things are changing.”
There is a clearer need to work together to leverage the enormous data the travel retail industry has today and build an ecosystem that offers the best experience for travelers at the airport, he said.
Such data includes travel patterns and preferences, based on information like where and what kind of purchases are made as well as interests gleaned from social media use.
Another strategy brands should focus on is selling for self-purchasers.
While air passengers used to think of airport shops as places to buy souvenirs as gifts for family and friends, many young people now spend time at duty-free outlets to pick up items for themselves.
Shopping for oneself now accounts for 52% of travel retail transactions, compared to pre-Covid levels of 46%, according to new research by M1nd-set, a Switzerland-based travel research agency.
Travel accessories and personal care products rank among the top categories for self-purchasers, and electronics, food and vitamins are also frequently purchased, the report said, as cited by International Airport Review.
Self-purchasers typically dedicate larger budgets to premium and niche products, research indicates. They spend an average of US$161 per purchase, 17% higher than those buying for other reasons.
“The self-purchasing trend in travel retail represents a major growth opportunity with the right approach,” M1nd-set CEO Peter Mohn said.
“Brands should focus on creating immersive, sensory environments that highlight indulgent products.”
