Oliver Gottschling Of Gebr. Heinemann On The Company’s Inflight and Cruise Line Businesses: Flying High and Making Waves.
19 minutes read
Introduction by: Peter Marshall
This really is as definitive an interview as it gets. Oliver Gottschling, Sales Director Inflight and Cruises EMEA, talks openly about Heinemann’s strategy for both sectors – highlighting the key differences, the challenges and the opportunities presented. As you will read, there is a driving ambition to grow the business, supported by great examples that clearly demonstrate how an agile commercial approach can achieve success.
Peter Marshall (PM): Welcome to TRunblocked.com, Oliver. Let’s start with the fact that Heinemann merged the cruise and inflight sales divisions to enhance the operational efficiency and value of your partners in those respective sectors some time ago. Now, these are two very different types of businesses. Can you explain what the thinking was behind this?
Oliver Gottschling (OG): So, indeed, they are very different compared to our airport operations, and that’s already their first similarity.They are two separate, niche channels – the in-flight business and the cruise business – but we have been in both for decades. We actually started in the 50’s with Iceland Air as our first inflight customer. And Gebr. Heinemann once started as a ship chandler, so there is already a strong heritage related to the maritime sector.
What makes these channels unique or makes them comparable is that we work across the globe, the ships are moving, the planes are moving. On board, we do have lots of crew members, which we have to educate – whether for inflight or cruise lines, that’s a given. Then we also see a similarity in the passengers – for example if they are on a flight which brings them to their cruise. They are already in a holiday mood and want to enjoy their trip – and retail is part of this holiday experience. In addition, the logistics part is comparable. It is key that deliveries are always on time and complete – no matter where the airplane or cruise vessel is at that time. There is no second chance after departure. We supply the goods to more than 300 destinations, harbours or airports. So there we have synergies.
But then we also do need to educate a lot because the businesses are different channels. What does it mean for fragrances to be on board a cruise ship, compared to being at an airport? How can we also make the industry a bit more, let’s say, relaxed or adaptive? I’m sure you’ll get to that later.
PM: I will. The inflight and cruise line businesses are very different from airport retail, Heinemann’s core business. Where do you see the synergies between these three sectors? One size does not fit all, does it?
OG: First of all, I think our very adaptability is what we at Heinemann are able to do. It’s interesting, if you come together with our airport colleagues from Africa, they’ll tell you Africa is totally different to an airport in Oslo, which is also totally different again to the airport in Frankfurt. And even in Frankfurt, they would say that Terminal A is totally different to Terminal B!
So I think that that’s what we’ve learned – to adapt to different channels, to different locations, to different shops. And we have to do this on ships and planes, too. The category mix is totally different on board cruise ships. About 70% is fashion and accessories, which is a much bigger share compared to airports.
Also for the Beauty category it is different for the top 10 beauty brands. In the cruise sector it depends on the nationality mix. I mean, on cruise ships, you have some, like TUI, where it’s 99.9% Germans or Austrians. If you take those figures and compare to the business we have at the airports in Vienna and in Frankfurt and take just the German share, it’s still comparable brands.
PM: So it’s really a bit of a juggling act, isn’t it? Really, very, very different.
OG: Yes, but you know, we have the data and we know how to look at the things. The outcome might be different, but the way to get there to the perfect assortment or to the proposal we are doing, that’s a comparable process.
PM: Well, that feeds in nicely to the next question about how you tailor the retail experience to reflect the unique needs and demographics of each cruise line or airline partner. Now, we all know the constraints of airlines. But with cruise lines, it’s a very different matter altogether – the scale and the size of space for one, and the passenger profile and the shopping behaviours for the other. You can’t adopt a cookie counter approach, can you? It has to be tailor made to every single carrier, maybe less so for airlines?
OG: Yes. If we start with airlines, the beauty is that we can look across all the airlines for their selling. And I also understand the feeling of each airline that they want to be different. And sometimes it’s true. You do sell different products on board Swiss than you do on Ryanair.
But if you compare the right segment with the same or with a comparable product, it makes you clearly see what’s working, and what’s not working, and that it actually doesn’t differ that much.
And then we also try to be pragmatic, because nobody chooses a flight because of the duty free offer onboard. So if we can learn what’s working, let’s say on board flights by Easyjet, could it also work with Jet 2 and with TUI? And if there’s no obvious reason why not, then we do it there as well.
If you only carry 50,60,70 SKUs that have to work across different regions, within different seasons – it is of high risk to bring in too many new brands although it might be interesting to have something new onboard. But especially in the beauty category we need those well known brands that also sell without too much testing and exploration, because possibilities are limited. I would always take the domestic and online markets into consideration: if there are big trends, we explain the challenge to new brands, ideally make advertisements fit our channel, work out a training plan and ideally an incentive – then it can work to bring newness into the air. But again, the commercial backbone are attractive, well known bestsellers which offer value for money.
PM: I don’t necessarily agree with you on that one. But I get your point. Now, what do you then think have been the key drivers that have contributed to your recent exceptional wins in the cruise line business – Icon of the Seas and Aroya are excellent examples? And what makes their offerings so uniquely different or special?
OG: Let me start by saying that with Aroya we have the biggest retail space onboard a cruise ship. It’s 1600 square meters, roughly.
PM: That is a very big space.
OG: Yes, that’s a big space. And to be honest, it was a bold move from the Heinemann family to say: we do this project with Aroya, launching a new ship in a completely new market. That’s something, I think, where we simply said, we want to do that! And besides all business cases and projections, you need to be open to explore this market and to develop into this market.
And I think there we just matched with the people at Cruise Saudi that we won this process and started this project.
PM: But what do you think enabled this? What do you think made the difference for you to win such a big concession?
OG: That we are open to learn with them, that we are open to go on a journey with them. We managed to bring in our installations, all the goods just in time. Although it was a hustle. I mean, the entire ship was turned around 98%. It is completely new. And then bringing in the goods here in Bremerhaven and finishing the shops, we proved that we were able to do this in time. And I think they relied on us.
There were also the touch points we had before. It was very much on eye level and we had very good communication from the beginning and a good level of trust to say: okay, this is a journey we’re going on. We know that we are not ready after two months. It’s not like adding a seventh ship to an existing fleet. It’s a completely new thing, and that’s what we are also exploring at the moment.
PM: So, Icon Of The Seas? What’s the story there?
OG: So Icon Of The Seas has obviously been won by our colleagues at Heinemann Americas, and we just proved that we are able to bring a new flavour, for example, to the logo merchandise. Again, it’s the guests. They are on holidays onboard. And when I visited the ship recently in Miami, what you see are people that are smiling when they embark. It’s because they are so looking forward to this trip. Having the right assortment, having also the right people in the background to do the activations, the promos, I think we just prove it can work so well.
PM: Of course the beauty about cruise lines is that the dwell time is there for three, five, seven days or longer. Passengers have got the time to talk about the product, to consider, to try before they buy. To come back and try again. They have the time on their hands, no pressure.
OG: Yes, it’s actually a very different type of selling that’s required because, as you say, the people come back. It’s not like at an airport where, you know, you’ve got 20 minutes and that’s it. Here it’s far more leisurely and, therefore, there’s a greater opportunity to cross-sell, upsell, and certainly convert.
And I mean, we have colleagues who go on excursions with the passengers. So if they are in the city, they join the tours, and they go to dinner together. They are building up relationships, which you can’t at airports. Guests are saying goodbye on the last day of the cruise, going to the shop and saying: hey, I just want to thank you! And lots of them, they don’t necessarily buy at the first visit to the shop. They come again, and there’s a real build up of trust.
That’s obviously how it works on ships like Hapag-Lloyd, where you see jewelry or pre-loved products at prices of 15, 20, or 30K. Spendings like these really require trust.
PM: Does it mean that the training for your sales personnel there is very different from elsewhere?
OG: Yes, in lots of presentations, we always highlight the fact that we don’t talk about passengers on board the cruise ship. We talk about guests.
PM: Exactly.
OG: And I think to be part of this holiday sales channel, it requires a different mindset.
PM: So it’s kind of a retail concierge, They’re not salespeople.
OG: Absolutely. And I mean, also, if there’s somebody saying: ‘hey, I would like to show my husband this pullover, can I take it to the cabin?’ Our answer is: ‘of course, please take it with you’. And then they’re checking it, and then they might come back two hours later. So we see our crew as part of the people’s holidays.
PM: Let’s move on. Now the words ‘discovery’ and ‘engagement’ are obviously key to everything you do in both sectors. Can you give me examples of industry firsts that you’ve pioneered? This question, I guess, is essentially all about your digitalization and omni-channel strategies. Can you tell us more?
OG: So, what we did on board of Aroya was that we launched lots of digital screens to get an atmosphere in the shop. We also launched the first web shop at sea that you can order/pre-order in your cabin and then pick it up in the shop.
We try to use tech to support our crew. We also have electronic shelf labels onboard so that the crew doesn’t have to change prices all the time. It’s now all done electronically, and that makes us much more flexible.
A nice activity we launched last year was our Enchanted campaign together. Guests receive a bracelet, and each day they can buy different charms. Actually that’s a very nice thing for both guests and crew – because it gives them a reason to come back, to connect, and it gives it a little collectible as a charm.
PM: Nice. What else?
OG: Just look at our activity plans for each crew.It’s actually impressive what’s happening there – from fashion shows to different perfume tests. Yes, some of them might not be super fancy or super modern or super new. But we regularly get feedback and if we stop those activities for whatever reason, guests ask for it. I mean it’s sometimes also something quite small. For airlines, as I mentioned earlier, we always have the challenge that it’s hard to test perfumes. So we actually developed sniff kits for Condor, just small boxes with a little bit of pet inside, which we could spray.
So the entire team was spraying and we were attending a Condor Air event. Each crew got some of our best-selling perfumes as a tester in a box, very handmade and very basic at the end. I think the cups are usually used for soy sauce with a china delivery service, whatever. But just plastic cups. And we got lots of positive feedback from the crew members. They now have them in their pockets. You know, it really helps them sell. So sometimes it’s super simple and after this proof of concept we develop this further and are already looking for more sustainable options.
PM: Just as a side comment, about 15 years ago, maybe longer, I filmed on a Virgin Atlantic flight from London to Tokyo. On that flight there was a dressed trolley full of Dunhill products, Dunhill accessories. And I think they sold about £4,000 worth of product on that one journey, which was not bad. Just a single trolley going up and down, and in a limited time slot, obviously. It looked and seemed very different because people felt it was a very tailor-made experience. Is that something that you would consider for airlines?
OG: So it’s a dedicated trolley for one brand’s products? Beyond what’s already available on board?
PM: Yes.
OG: We’d be open for that. Why not?
PM: Well, today, what we are definitely seeing now is the number of airlines who are doing onboard retail has declined. Arguably, in most cases what they were doing wasn’t very good anyway.
OG: Exactly. They didn’t do it properly and then the costs rose and then it was too complex.
Because those who really are good at doing it are still growing in this channel.
PM: Let’s go back a bit and look at the role the data analytics play. What do you use, and do you find you get a better understanding of passenger needs and maximizing onboard revenues because of the data that you employ?
OG: There is still not a lot of data available on who is buying onboard. We collect and use a lot of data already, but we look forward to the day when payment devices are connected with passenger data. This would allow us to even better understand the demographics of buying and non-buying guests. Currently, there is still no link in the systems.
PM: It’s amazing that this part of the travel retail business is still operating in silos. It shouldn’t be mutually exclusive. It’s time for genuine collaboration. Does no one want a win-win?
OG: You’re right. You don’t get it. Me neither. Nevertheless, what we have is what we have and that’s all the data from the sales and we work well with our major airline partners. So we have a very good transparency of what is selling where, and we use this data to compare and to rank products. This helps us to make a proposal, what a perfect category mix looks like.
We also use the data which we generate ourselves with our own tools and we definitely have good insight from the industry partners, too, like what’s working in which country etc. So we are able to present a very data-driven proposal to our customers.
We also don’t just put fragrances on the table or products. We look at the current assortment setup, including price points, gender performance and subcategories. And then we really look and say: okay, how do we close the gap for men’s perfumes above 50 euros? What are the best options?
But overall, there is still room for improvement when it comes to data transparency and data sharing – which everyone along the value chain would benefit from.
PM: Do you look at local products as well those that are ‘hot’ in given countries?
OG: Local?
PM: Yes, locally famous products.
OG: The beauty of the airline business is that you can really sell one SKU 100,000 times. Even if you take Istanbul or the biggest airport locations where there’s a lot of focus, it’s not possible to sell as many pieces of one single perfume as we do with our top airline products. So when we talk about assortments, we always look at efficiency and how much rotation is needed. If there is a local product and it’s something special, we will look at it. But again, we need to make sure that the product is known to the passengers on board, or that it’s super well explained in the magazine.
I mean, two years ago we had the Sol de Janeiro launch which just went through the roof and also onboard the airplanes. You found it everywhere, but this didn’t harm the sales on board. It benefited from it. People were aware and they wanted to test it.
And the same we have with some big launches from the industry, like from Puig with Phantom or Fame.
We played that across the entire plane and Puig integrated it into their 360 marketing campaigns that you saw at the airport, you saw it at the gates, you saw it onboard. So there we are actually also benefiting from the big launches.
PM: You’ve clearly enjoyed a good deal of success in both sectors, but what are the main logistical challenges you continue to face and how are you overcoming them?
OG: So one of our big problems in the past was the returns from the flight business. And there we developed a database where we created a pre-warning system so that we could compare sell-in and sell-outs already during the listing period. Then we just openly communicate with our clients/customers. We won’t necessarily wait until the listing period is over. We’ll suggest: let’s stop supplies and let’s think about activating the product.
And then we work together with our training team, for example, and shoot a short video, send it over to the crew to explain the key topics. Or we agree with the brand to run a campaign. Now returns are not a big issue anymore. We’ve got this under control.
PM: What about leakage? The products go through so many hands. By what percent have you managed to bring leakage down to?
OG: Broken products are one thing and theft is another. But I think it’s getting better. We still have this discussion about cello wrapping. Sustainability is important here, we respect the need to act on sustainable packaging, but we also need to protect the products. They need to last – otherwise it would also not be sustainable. But we are constantly looking at alternatives.
PM: Yes, it’s a difficult juggling act for all businesses. There appears to be no quick-fix solutions here. But that links nicely to the next question on sustainability – one of Heinemann’s major pillars. How are you addressing this in both sectors’ operations, notably on sourcing, packaging and waste management?
OG: You will have heard from Saskia already what we are doing.(Watch out for Saskia Moller’s interview shortly on TRunblocked.com). Regarding logistics, we ship a decent amount of products on each pallet because, for both cruise ships and the airlines, the orders have to be of a certain size. For example we do have an airline client which we deliver to more than100 locations, and if they order too frequently and you only have two layers of products on a palette, then this is simply not sustainable – from either a cost or a sustainability perspective. Therefore, we carefully look at order patterns, at order frequency, and also then, obviously, how we actually ship the products, how they get there.
So together with our logistics teams, the supply chain is key for us.
PM: So what, then, do you see as the current trends across both sectors? What are the key learnings that you can share based on your experience with the travel retail community?
OG: For both, if we look at our biggest customers and partners, the beauty is they are growing. So, right now, Ryanair announced they want to grow to 300 million passengers. In addition, other leisure and holiday airlines like Jet2, TUI, easyjet, WIZZ and Condor are expanding fast. In consequence, we expect very solid growth in both channels – inflight and in the cruise business.
There are also projections that cruise lines will hit 40 million passengers a year soon. A 10% increase annually is expected for this sector. And it’s not just about bigger ships and new ships. It’s also about a really decent volume of shopping on board, which is comparable to a decently-sized airport. And it’s about the size and the quality of the retail offer, too.
So that’s interesting and that’s what is catching the interest of the industry. There was a time where both channels might not have been fully on the radar. But we are now working on our communications towards the industry. And that’s, again, the synergy we’re explaining with these channels and how the industry can succeed here, what we need from them. All of this with a good organic growth in the background. There are good growth stories for all parties involved. And we need the brands to understand that we need flexibility: they need to accept smaller ranges and less space in all our mutual interest of securing a healthy rotation of products which do not bind too much money.
PM: So, given the exponential increase that we know that travel numbers are predicted to be over the next five, ten years, and given the corresponding projected growth of the cruise line business, where do you expect the Heinemann business to be in five years’ time? How much percentage growth do you see for your own businesses that you run? If it’s 10% now, is it 12 in five years’ time? Is it 15?
OG: It is very dıffıcult to predict as you will appreciate, because any big win – and we hope there will be more – will make such a difference. But what I want to point out is that airlines and cruise lines are an integral part of the overall diversification strategy that we are following – not relying just on one channel, not relying on one region. This is definitely one important aspect. Obviously we’re looking for growth, and we see great opportunities.
Having global operations in Miami, Singapore and here, we can operate cruise businesses from everywhere. This is a key strength of our business. And it’s obviously a big asset that we can go for local brands if there are Chinese or Asians onboard. Here, for example, our experts in Singapore can support. And at the very same time we can talk globally with some brands.
That’s definitely the next evolution for us to get on to the industry side – one global answer. To be efficient, we don’t want to talk to different entities because it makes it super complex, especially if the ship is in winter in one region and in another in summer. We just need a global agreement with the industry.
PM: Got it. And back to the growth prediction?
OG: We are currently in some tender processes. If they are positive, then we will significantly grow above organic growth. But there should be good growth regardless. I think there will be plenty of opportunities globally with all the cruise ships in the pipeline that will come up globally.
So obviously we have goals and they are ambitious for sure. But will not share any percentages.
Talking about growth, we now have a first ship in the Middle East with Aroya, but there’s probably also more cruise businesses across Asia, and we can supply them from everywhere.
PM: Yes, the distribution arm of Heinemann is a massive plus for you, for sure.
OG: But we’re also learning all the time. Our Airline Forum this year highlighted some great new ideas.
We also had Airbus on stage, where we were talking about the future of the cabin and we were in a very cool project that looked at the inflight entertainment system and how we can be part of that system. A system that recognizes that a passenger was interested in Rayban’s Aviator after watching “Mission Impossible” – and then, if comparable demographics watch this movie, they will automatically receive the Aviator Ad after watching the movie.
PM: Yes, I read about Airbus coming on and that was clearly a smart move – especially if you’re involved with them in some way. I mean, that’s really getting on at the ground floor, isn’t it?
OG: Yes. I mean, let’s see how we can connect our airport business with our inflight business. There might also be completely new media channels. Also for the cruise ships, if we can then extend the shop with a ship to home, that’s where you can really educate people and guide them.
I’m saying, let’s take everything up a notch or two and actually create content for passengers on the plane, or airport, on cruise lines, in their homes.That’s definitely the next step. It could be just like tailor-made shopping. And then it’s not about getting the trolley off the plane. It’s about offering something which you can order right away, delivered wherever you want it. It’s a win for the passengers.
PM: Well, for most things in this business, especially for inflight, it’s you that have to present the airlines with the solutions. They won’t necessarily come up with them by themselves.
So, moving on, to one last question. If there are three things you want to say to the industry right now, and this across both sectors that we’ve been discussing, what would they be? This is your platform, Oliver.
OG: The one thing is to make our life easier in terms of making tailor-made solutions as an industry partner. And if you want to find out more what the tailor-made solutions could be, we’re happy to talk and to share our view on it.
But it’s not just bringing single products on board. We need to have a package, we need to talk about trainings, we need to talk about marketing campaigns. So that really has to be tailor- made.
Then let’s have global solutions, especially for the cruise business, that makes it so much easier to handle. That we don’t talk regions, we talk channels and those solutions instead.
And the third is: let’s not be too stiff when it comes to brand guidelines who say: hey, we don’t want to have this, or that. Let’s have fun in selling products and let’s have a more pragmatic view on guidelines, with what has to be listed next to what. Some brands need to be a little more relaxed – airports, inflight and cruise lines demand different mindsets in today’s marketplace. Regimentation is not the answer. Agile, forward-thinking minds are.
