Shopping at a travel terminal used to be a simple process – a snack, a drink and then you’d be on your way to your destination. But in recent years, travel terminals have evolved beyond that. They’ve not only become a haven for mid-market and luxury retailers – they’ve also led to the creation of its own sector in the retail industry.
As the UK’s retail industry continues to be plagued by challenges, travel retail destinations such as airports and train terminals, are bucking the trend.
Jen Musgreave, strategy director at marketing agency Rapp UK, believes that airport-based retailers in particular are “in the right place at the right time”.
“Retailers are actually responding to consumer behaviour,” she said.
“Travelling, whether for business or pleasure, is a break in routine: the normal rules don’t apply and impulses are allowed, from the very minute you set off.
“In particular, when going on holiday, consumers get into the mindset of treating themselves.
“In an airport terminal or rail station, consumers are a captive audience with time to spare or just plain bored – add to this the limited competition between categories in this artificial marketplace, and it’s a retailer’s dream.”
In addition to attracting distracted travellers, travel retail has been able to take advantage of the devaluation of the pound since the Brexit referendum three years ago. However, there is a common misconception that customers can find better deals thanks to the tax-free deals at airports or international train terminals.
“In an airport terminal or rail station, consumers are a captive audience with time to spare or just plain bored”
Michael Wood, a principal digital consultant at tech agency Astound Commerce, told Retail Gazette that this perception was being eroded by online shopping.
“However, smart travel retailers are taking advantage of digital and offering services such as click and collect or delivery to areas such as lounges to offer customer convenience and encourage consumers to spend before they get to the airport,” he said.
Fiona Rayner, head of international operations at travel retail specialist Blackjack Promotions, agreed: “The two have become blurred, and ‘duty free’ is not the offering it once was.”
Nevertheless, she added there were still savings to be found in duty free versus the high street, although “the message terminal retailers are focusing on is in offering shoppers something they can’t get on the high street”.
Meanwhile Freddie Sheridan, director at retail design agency Sheridan & Co, argued that duty-free shopping impacts luxury purchases more than it does in any other sector “because shoppers are more likely to make a large purchase if they know it is at a discount”.
“Whilst some customers will be looking for a specific item from a specific brand when they shop at airports, many customers will enter with a more general need in their spending,” he added.
“In this instance, it is important for brands to recognise that travel retail environments are becoming more competitive.
“In travel retail with customers on a specific time deadline, the challenge is invariably, ‘How do you do this in less space and less time than many other retail environments?’.”
Furthermore, there are many retailers that appear to struggle on the high street, but seem to trade well within travel terminals – a prime example being WHSmith, and to a lesser extent, Boots.
WHSmith consistently reveals surging sales in its travel retail arm, while Boots recently revealed it would shut down more than 200 high street stores across the UK.
Nicky Stewart, a partner at law firm Howard Kennedy, said: “Some retailers, such as Boots and WHSmith, have a single pricing structure for all of their UK shops, but thrive at travel terminals because they are seen as the ‘go to’ destination for essential travel products, books, etc.”
Conrad Poulson, chief executive of behavioural measurement service Huq Industries, argues that regular travellers are looking for convenience.
“They want to pick up essentials on the way to from work, books and magazines for those on longer journeys,” he said.
Musgreaves agreed with Poulson. She said WHSmith sold the kind of journey essentials that people need when travelling, while on the high street, WHSmith has plenty of rivals. The retailer blamed its high street performance for a half-year profit crash of 21 per cent in the six months to February 28. It also attributed it the recent acquisition of US travel accessories retailer InMotion.
“It is important for brands to recognise that travel retail environments are becoming more competitive”
In addition, WHSmith was recently named the worst retailer on the UK’s high street in an annual survey conducted by consumer lobby group Which? It was criticised for its poor value for money, poor in-store experience and service, and for its stores being “cramped and messy”.
“WHSmith pays no duty on its products but doesn’t pass any savings onto the customer,” Sheridan told Retail Gazette.
“Customers probably feel like they are getting a good deal because of their location in an airport where other retailers are removing the duty however, in reality they are paying high street prices for their airport items.
“This move from WHSmith makes for a more profitable business model for the company and others like it.”
Perran Jervis, head of retail at law firm TLT, said “WHSmith has been particularly successful in leveraging a high street brand in travel hubs where they have a trusted brand for UK travellers but also expats.”
Poulson highlighted that aside from airport terminals, WHSmith also performs well at train stations.
In recent years, train stations have also become about much more than just grabbing a coffee to go, and despite the fact that train travellers usually have less time intervals than flying passengers, terminals are ramping up their offerings.
Rayner pointed out that there has been an increase in “specific place-based associations such as Paddington Bear at Paddington station, and Harry Potter at King’s Cross-St Pancras, which tell a story and bring joy in a way high street shops are not traditionally placed to deliver”.
She added that what sets travel terminals apart from other shopping hubs is that the retailers there understand their customers as passengers first.
“If you think about the high street, you know your demographic, but you don’t necessarily know when they will be coming into the store,” Rayner told Retail Gazette.
“If it’s raining, they may not bother to pop out to the shops on their lunch break. These variables don’t have the same impact on terminal retailer trade.
“They are making an intentional journey, so retailers are able to better identify customer demographics, be they a commuter who wants convenience, a holiday maker who wants a travel exclusive, or a business traveller who wants gifts.”
However, Rayner noted that while airport retail seems “glamorous”, “train travel isn’t quite there yet”. Despite this, she has noticed some major railway firms trying to reignite “Golden Age excitement” in their marketing campaigns to encourage people to think differently about train travel.
“Our retailers welcomed over a quarter of a billion customers into their stores during the last financial year”
Poulson pointed to the upmarket retail offering at St Pancras International train station and how it appeals to the demographic of international tourists and professionals working in the Kings Cross tech hub, which now hosts offices for Google and Facebook.
Meanwhile, one train station that recently announced a retail transformation is London’s Waterloo, Britain’s busiest train station with an estimated 94.4 million passenger entries and exits each year, according to the Office of Rail and Road. In late June, details emerged about the planned retail transformation of the station’s former Eurostar terminal.
Opening in spring 2021, the scheme will feature 40 glass-fronted retail units over three floors in the form of an upmarket shopping mall to further boost the terminal’s retail appeal. The development will also feature a mezzanine and public spaces along a new pedestrianised street called the Waterloo Curve.
Network Rail head of retail Daniel Charles told Retail Gazette that over the last few years, despite the challenging trading retail environment, train station retail has “continued to perform very well”. In the 2018/19 financial year, retailers in Network Rail train stations saw a sales growth of 4.36 per cent, with like-for-like sales at 1.32 per cent – well above the BRC figure of 0.05 per cent for the same period.
These results also marked the eighth consecutive year, and 32nd successive quarter, that like-for-like retail sales have increased for Network Rail.
“This growth in sales is driven by high footfall figures – our retailers welcomed over a quarter of a billion customers into their stores during the last financial year,” Charles said.
“Whilst fewer people are visiting the nation’s high streets, 900 million people pass through Network Rail stations every year and this number is increasing as we continue to invest in our stations and passenger experience.”