Imagine you are working for a large TR operator. You have won the tender to deliver the services at Miami Airport – you are tasked with building the offering, the demographic profiling, the pricing strategy, the promotion dynamics, the marketing and ancillary income mix, the staffing needs and the service strategy.
BUT then…. you are told that you need to set up this business for Tokyo Airport instead, and you have 20 days to make that happen. This is cruise retail!
If you think that all travel retail needs the same strategy applied to it, the answer to that question is obviously no. Simply put, cruise and airport retail are like the ‘ying’ and ‘yang’ of the TR industry, the ways in which they produce results are totally different.
In an airport, as we all know, travellers are generally very short of time. This means that the retail in airports must appeal to travellers fast, easily and simply. Conversion is the metric that is key to achieving success. This is shown with 1-way walk through stores, open plan large retail spaces that entice people in, and lots of digital marketing and brand activations to catch instant attention and commitment from ‘passing traffic’. With all this instant consumption, convenience and traveller choice, location, visibility and predictive data modelling are hugely important to all brands in determining the true value offered.
Working in TR, we all generally understand the dynamics of airport retail and the logic associated with all decisions in respect to all the points already covered. However, when we leave the safety of being “on dry land” and head out onto the oceans, everything changes.
Cruise retail takes some of the same logic of airport retail, but adds layer upon layer of logistical complexity and change to the structure to continually complicate it and alter the result. Cruise ships constantly are travelling around the oceans and so, too, are all the business models day by day in the retail onboard. Nothing stays static, nothing remains constant. Everything changes!
Firstly, we don’t have travellers, we have guests. This is not just a label change; it is also a huge behavioural and psychological change in their mindset, especially as to what they buy. These guests are no longer travelling, they have arrived.
On a cruise ship, guests are generally very relaxed with plenty of ‘fun’ time on their hands. With 80% cruisers being onboard for around 7 days, guests have plenty of free time to browse the onboard retail offer as a part of their cruise experience. The penetration level into shops onboard is higher than airports, as ‘slow’ time equals opportunity. Guests will come into the stores on multiple occasions and get to know the onboard shop teams well. This connection is the “spark” that makes retail happen. On cruise ships, people buy from people not from shops. Why? Simply browsing onboard spaces passively as per a large walk-through retail space does not work. Products must compete for space, create interest and make an emotional connection, usually by the way they are recommended. Products which are activated can sell multiple times more than those which are passive. This means delivering events, training, incentive and USP building.
Cruise ships are all about buy now, wear now, use now. Cruise ship guests love to treat themselves and will most likely be in the mood to think ‘why not’! Many guests will be onboard to celebrate a special occasion such as an anniversary, birthday, extended family gathering and will want to celebrate the moment in a truly unique way.
Purchasing for taking home or for gifting in a cruise ship is a smaller part of the business vs airports, usually because of the immersion in the holiday, enjoying the moment and because luggage space is generally full already.
How does this all appear together? The graphic below shows the ying/yang model in the simplest way possible:
What does that mean in terms of category performance in cruise retail compared to airports?
It should be noted, as there is no industry-wide data for cruise retail, this is an experienced estimation. In terms of market share of the key categories, the Buy Now, Wear Now categories outperform airports substantially. Jewellery, watches and fashion all index much higher than P&C, tobacco and drinks. The difference between the two accounts for onboard shop setup but also the prioritization of sector business models.
The differences in top sellers, brand rankings and sell through is also affected by the differences in the two retail models. The top selling brands on cruise ships are always those which have fully understood that the key to business success in cruise retail is to be convenient, memorable, value, exclusive and recommended. Setups which prioritize these parameters understanding the paradigm shift between the two sectors will ultimately be successful. A ‘Copy > paste’ business setup simply doesn’t work on the oceans.
But this industry setup is a traditional one, giving advantage to a select few brands who have built a long standing setup at sea. Ultimately, change can and should happen. The potential and offering in cruise retail stands with brands in these under-utilised categories adapting their business model cleverly enough to be more cruise focused and seizing the opportunity. The market share in cruise retail is a stubbornly traditional one and has followed a ‘tried and tested’ pattern for decades, so it could be ready for adaptation.
But will this happen? This sea change does require brands to have a long-term approach, a desire to invest substantially and adapt their simpler airport model. Cruise is a rapidly growing sector and opportunity here is strong. But, to do this well it will ultimately require some sturdy sea legs and an open cheque book. In this fragile and uncertain market that we are in, does that appetite really exist?
And therein lies the most important question facing the viability of the next phase of cruise retail evolution. If, as an industry, with no comprehensive data sharing, continued dynamic changes, logistic complexity and challenging physical environments, how can you make a substantial inroad into the sector? This is the question that will continue to perplex the travel retail sector and ultimately the overall desire to invest in the cruise retail channel.
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