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Peter Marshall Send an email April 26, 2021
Less than a minute

The Price Must be Right:
Reclaiming the Soul of Travel Retail

By: Marco Passoni, Senior Executive VP, TW.O & Partners
What is the most important thing about travel retail or duty free? We spend a lot of time talking about this topic. We talk endlessly about experience, exclusivity, collaboration, shop design and digital.
But there is a more important question we should all be asking: what do our customers actually think is the most important thing about travel retail? Deep down we would all know what they would say. They would say price.
So how did this disconnect come about? How have we lost touch so much with what our shoppers want from the market?
The truth is we have taken our eye off the ball. We have become complacent in our place in the retail industry. Maybe the name ‘travel retail’ helped us to move away from the more price-driven idea of ‘duty free’. But we cannot escape the fact that a good price offer is at the heart of our business. Or it should be. All the talk within the industry today is dominated by omnichannel, digital and experiential. These are all big factors, and they are a big deal for everyone in every part of retail.
Yet we as a travel retail (or duty free) industry need to be talking about the one thing which made us stand out –  we need to be talking about price. Our price advantage is being quickly eroded. No, worse than that, it is gone. Yet, for some reason, no one in the industry wants to talk about this.

Price is the elephant in the room. Why aren’t we talking about it?

Well, our shoppers are talking about it. They are talking with their wallets. Before the pandemic we were consoling ourselves that revenue and the value of the travel retail industry was going up. We were using that to hide from the important fact that average spend was going down. Our shoppers were spending less. And they will still be spending less again when they come back after the pandemic.
The rate of conversion in our market has dropped about 50% in a decade. That is a horrifying statistic. It was not brought on by the arrival of digital. It was brought about by a lack of interest from our shoppers.
Low cost carriers have changed the passenger model in our airports. These are consumers who want a quick deal, who want to be wowed, and they expect duty free to offer them a price which will wow them.
We can talk for hours about the fact that travel retail and duty free are different, or that the rules of the sector have changed. But the truth is our customers do not care. They want a good price or they will go elsewhere. If our price is not better, then why should they carry it with them? If they are going to shop online, then why would they do it with our retail platforms rather than the ones they use every other day?
Travel retail must reclaim what made it special in the first place. We must reclaim the one thing that our shoppers expect from us –  we need the best value proposition.
The current business model we use for concessions is a big part of this issue, as it so often seems to be today. Rising rents and Minimum Annual Guarantees have forced prices up and we have all been so focused on getting the best space and the best contract that we have forgotten to offer shoppers the best price.
A big, shiny state-of-the-art store is no use if shoppers do not want anything that is inside. I am not suggesting this is a problem which we can just fix, but it is one which we must discuss. We must address how to overcome this. All our favourite topics will always be important. But to ignore pricing is foolish. No, it is suicidal.

Travel retail needs to heal itself and rediscover its roots. Or….

If travel retail does not offer its customers the best value, then the truth is it has no value.
I do not believe that this is the case. But I am certain that we have a big problem to fix. The first step in solving a problem is admitting that you have one: shoppers do not see travel retail as good value anymore.
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Peter Marshall Send an email April 26, 2021
Less than a minute

Peter Marshall

Founder: trunblocked.com/Marshall Arts
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