Airports retailing set to take off

Airports today are overhauled from being dull, boring and lack luster places to a more vivacious, energetic and effervescent destinations. All thanks to the emergence of the concept of airport retail in India. Punita Sabharwal explores the coming of this new rage and emerging trends in airport retail

The new age traveller is being pampered in every possible way, and for this the credit goes to the newly emerging trend of airport retail.

Work stations, malls, duty-free shops, are all set to change the perception of airports. In today's busy schedule, and keeping pace with the changing times, people are keen on doing a lot simultaneously. The smart and intelligent traveller today is no more an ordinary man as he wants nothing but the best. And that is what the retail stores are working for at the airports in India.

Airports in India are one of the most promising sectors for retail development. Today every premium brand in India is keen on participating in the airport's retail zone. Airport retail environment offers various brands of luggage, clothing and accessories that obviously have a high sensitivity and appeal. Destination food and souvenirs is another specialised segment.

At the new international airport being built near Bangalore (BIAL), a large number of multi-nationals, like the Nuance Group, the DFS Group, Alpha Airports Group, Dufry Group and Gebr Heinemann have lined up to set up retail services, including duty-free shops. Domestic majors like Shoppers' Stop, Pantaloon and Oberoi Group are also in the fray to run retail services at the airport.

The concept of anchor stores, similar to the ones we find in malls, is also expected to pull in crowds on a daily basis. This will be necessary to produce a critical mass for shopping. Commenting on such a format, Neeraj Katoch, Head, Franchise Operations, Dominos, said, “From a company's point of view it will be a good investment.”

Franchise model

Bids for food retail and city side retail at BIAL may face a policy hurdle since foreign players are allowed only in single brand retail. Therefore, foreign companies seeking to provide food and city side retail at the airport may have to opt for franchisees. However, in the case of duty-free products, foreign direct investment (FDI) is allowed.

Measures adopted by AAI

Indian airport authorities have understood the need of the hour, ie, to upgrade the services at airports. Recently, Mumbai International Airport Limited (MIAL) opened its tender for local retailers and for duty-free shops. The Airport Authority of India (AAI) has invited tenders for five-year duty-free shop contracts. There are nine airports under the tender, including Trivandrum, Kolkata, Chennai, Bangalore, Hyderabad, Calicut, Gaya, Ahmedabad, and Goa. The AAI has also identified 15 non-metro airports including Aurangabad, Bhubaneswar, Coimbatore, Vadodra, Varanasi, Vizag, Trichy, Rajkot, Port Blair, Patna, Bhopal, Indore, Agatti, Nagpur, and Khajuraho for development. All these will emerge as major tourist destinations where retailers can also add regional flavours and continue to generate revenue.

Company's take

Companies are all geared up to grab this opportunities as they find it beneficial to open retail outlets at airports. The target audience who make up passengers, visitors and escorts, is acting as the main attraction for these companies. Opening outlets at the airports is beneficial for both companies as well as the travellers. Every kind of retailers is likely to be involved in the retail of goods, like, cookies, candies, casuals, formals, accessories, brown goods, white goods, departmental stores, value stores, cosmetic, food, general merchandise, perfumes and cosmetics and liquor and tobacco.

Shoppers' Stop will be opening a duty free shop at Mumbai Airport in a joint venture with the Nuance Group, which happens to be one of the major airport retailers all over the world. 

Commenting on this new destination Katoch says, “In the current scenario a lot of people have opted to travel by airplanes and there is hardly anything that they get at the airports. For the business traveller who travels late at nights, or catches an early morning flight, this sort of convenience will definitely benefit him as he does not have time to move around the city.”

Sudipta Sen Gupta, Senior General Manager Marketing, Café Coffee Day also gives a similar opinion, saying, “With an increase in the number of low-cost carriers, which indeed is a boon, passengers at times do not have a variety of food items in the plane to choose from. Therefore, when a passenger travelling from Bangalore to Mumbai in his pursuit to make it to the 11 am meeting, would be delighted at the option of grabbing a quick breakfast at the airport before beginning his day.”

Café Coffee Day has already entered the segment by opening nine airport cafes, including New Delhi and Bangalore, and tourist attraction centres of Agra and Jodhpur, besides upcoming hubs such as Kochi and Coimbatore.

 Bappaditya Basu, Head Retail, TrammellCrow Megharaj which is currently property consultants for MIAL, says, “We are positive that there is vast opportunities available for retailers to use at the airports, and therefore, multiply their profits exponentially.”

According to a survey conducted by the company, the organization will receive huge revenue from its shopping complex and other commercial premises.

What all it takes

Retailing at an airport is a unique opportunity in its own way. It is sought by many and is given to only those who satisfy the requirements listed by the airport authority.

Before major airports were privatised, a procedure for inviting tender was followed, i.e. tenders are called for by the AAI for specific facilities such as snack bar, branded fast food outlet, restaurants and cyber-cafes within the airport.

This two-bid process included a technical and a financial bid. In the technical bid the participating bidder had to qualify by showing his experience in the specific business, and in the financial bid, similar to any other, the highest bidder wins.

Since airports today are getting privatised, certain agencies like Trammel Crow Megharaj, are getting in retail for them.

Shortcomings of retailing at airports

Although companies are all set to cash in on the untapped potential of retailing at airports, the costs of the outlets have to be taken notice of by the companies. This is because cost of an outlet in a mall will be certainly lower than the one at the airport. High rentals should not deter a retailer for opening an outlet in an airport because the increasing footfalls and the ability to seek out a larger audience downplays the charm of a mall.

The time limit is another drawback. Tenders are just for one year, and every year it has to be renewed. If a company has invested a sizable sum in the project, then investment for just one year is actually a big risk because you might not recover the amount in that time. Katoch says, “Even if it is a system of floating tenders, the duration  has to be for a longer period so that the capital investment that make actually justifies your presence there.”

Global trends in airport retailing

Airports, globally, are seen as a major shopping market, and as such, expand their facilities by including retail outlets and other commercial destinations from time to time.

Take a look at the lounges, the sports bars, and you will realise how much comfort is being added for the traveller now. Even before reaching his destination a traveller can set his mood, relax, and comfort himself before getting ready for the corporate meeting. Five star style lounges, state-of-the-art business centres, multiplexes, spas, health clubs, fine dining experience are all there to be had at the airport.

Hong Kong International Airport is regarded as one of the best airport the world-over. Besides the state-of-the-art amenities, it offers an entertaining retail experience to the travellers. Free internet access, multimedia lounges, workstations, children's play area are some of the major attractions. Besides, one can buy duty-free liquor, perfumes, cosmetics, local and international brand fashion items, merchandise.

An overview

The world has accepted this new phenomenon and India is also readying to cash in on this new concept. As airport authorities are in for a huge revamping period, it is boom time for retailers, because creatively designed retail outlets not only catch the traveller's eye but also bring in cash. There is a large and captive audience waiting to be greeted at the airports so it remains to be seen what kind of experience a retailer provides to the shopper.