Why Airport retail is booming.

Shopping Malls Might Be Dying, but Airport Retail Is Booming

Shopping Malls Might Be Dying, but Airport Retail Is Booming

The cities of today and tomorrow.
Sept. 7 2017 4:56 PM

Your Misery at the Airport Is Great for Business

Retail in terminals is booming. How else would we soothe our anxiety?

170825_TERMINAL_airport-retail

Mark Nerys

RadioShack is barely walking—but InMotion Entertainment Group, which sells electronics in airports, is thriving. It now has 125 locations and is the 43rd-largest consumer electronics company in the U.S.

Newsstands are shutting down—even Harvard Square’s famous Out of Town News is in jeopardy. But Hudson News, many of whose locations are in airports, has dozens of stores under construction.

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Yes, there is a brick-and-mortar retail apocalypse afflicting large chunks of the industry. Sure, home-improvement stores and dining establishments are doing OK, but retail chains are going bankrupt at a furious pace, malls are emptying out, Sears is enduring its decadelong calvary, and Manhattan’s avenues are suddenly pocked with vacant storefronts. But there is one chunk of the vast retailing sector that seems to be going strong, with no caveats: stores in airports.

When was the last time you saw blight in a terminal? Selling electronics, books, clothes, food, and services in U.S. airports is a booming business. Globally, airport retail sales rose 4 percent in 2016.  According to Micromarket Monitor, revenues from U.S. and Canadian airport retailing should rise from about $4.2 billion in 2015 to nearly $10 billion by 2020—an impressive compound annual growth rate of nearly 20 percent. Enterpreneurs are having success building chains that exist only in America’s great in-between spaces. Avila Retail has nearly two dozen specialty stores based in airports, including its Earth Spirit folk-art emporia and the awkwardly named Indigenous, which peddles Native American crafts at the Phoenix Sky Harbor International Airport.

It shouldn’t be surprising. Airport-based retail, which underwent a transformation in the 1990s as an effort to improve the travel experience, has some significant advantages over its non-airport-based counterpart. As much as traditional brick-and-mortar operations are suffering due to mega-trends—millennials’ preference for experience over stuff, the relentless onslaught of e-commerce in general and Amazon in particular—physical retail in airports seems to be thriving in part due to them. What’s more, many of the factors that have made air travel a miserable experience are weighing in favor of airport retail.

Airports supply the greatest desideratum of physical retail: foot traffic. Outside them, people can easily go through their days without having to pass a shop window. But in airports every passenger has to walk past dozens of them. And foot traffic is increasing. The number of passengers flying has risen in every year since 2009. In 2016, according to the U.S. government, U.S.-based airlines carried a record 823 million passengers, up from 700 million in 2009. And these are good customers. While air travel is mass transit, flyers tend to be wealthier than typical Americans, and thus have more money to spend.

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Another advantage: Physical retail tends to see activity concentrated in a small number of hours and often sees business drop off sharply on weekends and holidays. But airports are busy starting at 6 a.m. and don’t start to empty out until about 10 p.m. Which means a lease on a few thousand feet of airport space gets you a solid 16 hours per day of operations. It’s not quite 24/7, but it is 365 days a year. Indeed, weekends and holidays are among the busiest times at airports.

Then there are delays, which make air travelers crankier but which actually work in favor of airport retail. When bad weather or missed connections or general crappiness strands passengers for hours—out of the reach of e-commerce—one of the things they do is walk around and buy stuff. Or relieve stress by getting a massage. XpresSpa, a chain of spas based solely in airports, was acquired for $40 million last year.

There’s another way in which the immiseration of flyers brings joy to airport retailers. On many coach flights, the airline now supplies you with virtually nothing to eat or drink. Worse, the Transportation Security Administration will confiscate any liquids greater than 3.4 ounces you bring with you through security. That means there is a category of necessities that you might need on the plane but that you can only buy in the terminal. Cha-ching!

In addition, people who travel routinely forget to pack things they will need while traveling. Plans change, as well—you’re on vacation and have to go to a business meeting, say. And in these instances, e-commerce can’t be of help. If you’ve left the house without headphones and are about to board a nine-hour flight, or if you realize that you need a tie but are 4,000 miles from your closet, Amazon Prime is worthless. Here are some of the things I’ve purchased at airport retail over the years that I already owned but were inaccessible because they were in my house: inflatable pillows, eyemasks, shampoo, saline solution, contact lens cases, sunglasses, reading glasses, 17 toothbrushes, 14 containers of toothpaste, collar stays, a tie, a dress shirt, headphones, chargers, extension cords, adapters, a sweatshirt.

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Many people who travel through airports are either going to a destination, or returning to one, where they are expected to show up with a gift. For a significant percentage of travelers, airport retail is the only thing that prevents them from showing up empty-handed. These are some of the gifts I’ve purchased at airport retail in recent years that I would not ordinarily buy when at home: Vanderbilt T-shirts, plastic Minnesota Viking helmets, See’s Candies, mugs, snow globes. Snow globes!

There’s more. America’s rising snobbishness surrounding food and coffee is pushing more people to purchase food and drinks in terminals. It’s not just that you have to pay for whatever fare is offered onboard; it’s that what you’re offered is likely to be swill (airline coffee) or crap (sandwiches wrapped in plastic, wan salads, highly processed protein packs). Fortunately chains (Starbucks, Shake Shack) have picked up some of the slack. And celebrity chefs and higher-end operations have viewed airports as an expansion opportunity. In the past couple of years, here are a few airport meals my family and I have devoured: burgers at the Shake Shack at JFK, a choriqueso torta from Rick Bayless’ Tortas Frontera at Chicago O’Hare, Cubano sandwiches at Café Versailles in the Miami airport, a decent brisket sandwich from Noshville at the Nashville airport, chicken tacos from Urban Taco at Dallas–Fort Worth, and a Blonde Bock at the Gordon Biersch bar in San Francisco.

There’s little relief in sight for the woes that contribute to the anxiety and depression of frequent flyers. But we’ve found on old-fashioned way to take the edge off as we wait to board: retail therapy.

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