Retailers gaining from duty-free outlets

Centre for Asia-Pacific Aviation (CAPA) estimates that duty-free spend at Indian airports will touch $1.6 billion by 2021 - an eight-fold increase in a decade.
Retailers gaining from duty-free outlets
While no airport gave out the size of the retail business at present, the Centre for Asia-Pacific Aviation (CAPA) estimates that duty-free spend at Indian airports will touch $1.6 billion by 2021 - an eight-fold increase in a decade, says a report in Economic Times.
 
 The world class airport terminals Indian metros got in the past few years have now caught up with the global trend of emerging as mega retail hubs. With private operators converting airport retail areas into malls and people with high disposable incomes frequenting them, sales here are outpacing downtown markets and high street shops.
 
So much so that many retailers have their best performing outlets at airports. This holds true for some of the biggest names with chains of stores across India like Croma and Fab India.
 
While no airport gave out the size of the retail business at present, the Centre for Asia-Pacific Aviation (CAPA) estimates that duty-free spend at Indian airports will touch $1.6 billion by 2021 - an eight-fold increase in a decade. The combined spend on duty-free, duty-paid and food & beverage will reach $3.5 billion by then.
 
India's busiest airport - Delhi's IGIA - is also the biggest in terms of retail sales. Its chief commercial officer (non-aeronautical) Shyam Sundar says, "A lot of international brands have entered the Indian market with their first store at IGI Airport. This includes Victoria's Secret and Salvatore Ferragamo. Many retailers have their best performing stores at airports in terms of either sales per square metre (SPSM, the biggest indicator) or in absolute terms. IGIA houses the best performing outlets of stores like Parcos (perfumes), Relay (confectioneries and travel accessories), Guardian Pharmacy and Ethos (watch outlet)."
 
Delhi Airport gave an indication of how they beat malls hands down. The average SPSM per month of duty-paid outlets (stores in domestic terminal and a few in international side) at IGIA is Rs 36,000 - almost three times the average figure for downtown markets. On duty-free side, the figure is Rs 1,38,000.
 
Delhi Airport gets almost 62% of its non-aeronautical revenue from retail stores, which have a compounded annual growth rate (CAGR) of 33%. The growth outside airports is much lower. "According to industry estimates, the CAGR of branded apparel is 18%; jewellery and gift items are 21% and electronics is 14% to 15%. The growth at airports is much higher," said Sundar.
 
A spokesperson for Infiniti Retail, a wholly owned subsidiary of Tata Sons, which runs the chain of multi-brand electronics stores Croma, said, "Our airport stores generate the highest per-square foot return. They also generate very healthy return on inventory as compared to other stores in the chain. Airports are high-traffic areas consisting of people with high disposable incomes. Fast-moving accessories, high-margin products do really well here."
 
Croma has seven stores at Mumbai, Delhi, Ahmedabad and Hyderabad airports and finds retailing at airports "a great business opportunity".
 
Fab India MD William Bissell termed airports "shopping malls with airline gates". "We have over 200 stores in India. Per-square foot sales at Delhi and Mumbai airports are among the highest. Airports are good catchment areas for male shoppers, who otherwise do not go out much for shopping.. Their favourite picks: electronics, watches, pens and bags" he added.
 
Mumbai airport did not comment for this story. It has also revamped shopping outlets to maximize non-aero revenue.
 
Bengaluru airport said it had the "highest spend per passenger in duty-free" without giving any numbers. "This (Bengaluru) airport has an interesting passenger profile and about 25% people passing through work in the IT business, of which over 70% are male and of manager grade or higher. Many of them travel frequently to the US and Europe. This is good with regard to the growing commercial revenues and we cater to this profile through our commercial mix that is busy and diverse," an official said.
 
Maximum shopping is done by people in the window between clearing the security-immigration desks and boarding aircraft. So, airports are now desperate to cut down the waiting times at check-in, security and immigration queues to maximize this window. This means all flyers - shoppers and non-shoppers - can expect shorter waiting periods at these counters, as per the ET retail report.
 
But there is a word of caution too for private airports not to go overboard in converting their terminals into mega malls. For instance, Delhi airport's budget airline domestic terminal 1D has a very narrow escape to the escalators leading to ground floor from where passengers take buses to aircraft. It is a blink-and-miss area between big shops.
 
"Airports must strike a balance between retail space and passenger facilities. If AAI completely ignored shopping areas earlier, now there is an overkill," said Aman Varma, a Delhi-based exporter travels at flies once a fortnight.
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