Panel Discussion: New Destinations For Airport Retail
Experts weigh in on how retailers are increasingly looking at airports as a place to engage consumers, creating experiences out of what was once idle downtime by catering to their in-moment needs with popups, services, app integrations and more
Gone are the days of cheesy souvenir shops and stale sandwiches. Having a retail presence within an airport is becoming a lucrative opportunity for brands as global travel increases—experts expect sales in the airport retail category for the U.S. and Canada to reach $10 billion by 2020, and that's more than double the amount in 2015.
Accordingly, retailers are rethinking their airport presence, and upping their appeal for the traveling demographic. In this discussion from the panel “New Destinations For Airport Retail,” part of New York Retail Innovation Week, three leaders in the retail and travel spaces weighed in on catering to the captive airport audience as well as the latest tech integrations to enable greater on-the-go engagement. Hear from Ty Manegold, president of ROAM Fitness, Andrew Deitchman of New Stand and Robyn Novak, vice president of FRCH Design Worldwide, hosted by Adrianne Pasquarelli, Ad Age reporter.
Adrianne Pasquarelli: Could you each provide an example of how you're working with airports to enable unique retail experiences?
Ty Manegold: Our company, ROAM Fitness, is a micro health club inside the airport, past security. We've got our one spot right now in Baltimore. We're working on a spot in JFK. We're also working on spots in collaboration with XpresSpa in San Francisco.
Our facility is a full-service health club. We can get you outfitted head to toe in about two minutes and working out in our facility. In addition to providing access to gym equipment, we also have a full lineup of rental clothes that's complimentary, through Lululemon.
We also sell all of their products in our store. We have a lot of folks who come up and actually think that we're a vendor for the gym equipment that we carry or any of the other stuff that's in our facility.
The goal is that we will expand into being this living showroom and this laboratory for individuals to try out the different products, and then encourage either DTC sales at the airport or follow up with customers for delivery at their hotel or when they return home.
Andrew Deitchman: New Stand started in 2016. We think of ourselves as a day-improving company. We're really focused on what people are doing as part of their everyday routines and how to uplift those routines. Our stores are everything from 100 square-feet on the NYC Ferry to 2,000 square-feet now at LAX. We're in office buildings, we're in residential buildings.
We combine what we do from a physical retail perspective with an app. That app is content‑based, with a big curation of articles, including everything from music playlists to cool things happening around the city. Everything we're doing is oriented towards urbanites who are on the move. We built points and rewards and other conveniences, like self‑checkout, into the app to get you through the line faster.
We’re also using spaces physically and digitally to introduce people to new products. Surviving as just a pure retailer at this point, particularly in low-margin businesses, is not something that anybody aspires to.
How to help retailers start to have significant media revenue is part of what we're doing as well. We think of that as a way to enhance the experience, ultimately, for the traveler. When they get to LAX, there's content that might be more specific to LAX.
They can learn about what's happening in and around their city while they're also snacking on a healthier snacks, finding a much cooler souvenir or discovering a new health and beauty item, a new bit of technology.
Robyn Novak: I am vice president, creative managing director at FRCH Design. Our firm is traditionally rooted in retail design, encompassing brand strategy, interior design, graphic design, and architecture of retail spaces.
We help design and implement concepts for all different types of brands, whether it be specialty brands, department stores, mixed‑use avenues—across the gamut. We're always going where our clients and our retailers are going. A big shift in the market over the past few years has clearly been into the airport sector.
It's really interesting to see how the brands are shifting there. The brands we work with range again from those individual brands choosing to create an outlet within the airport realm to some of the larger retailers, like DFS.
We're trying to help them come up with new experiences for consumer engagement. In this particular category, you have a very captive audience. Our clients are coming to us, and saying, “While our brand may do X, Y or Z in a traditional retail format, we need to think differently in the mindset of the airport consumer. How can we translate new experiences, new offerings, whatever those touchpoints might be, to that captive audience?”
That's our realm. We do everything from design and concept, to even helping airports sometimes in a more traditional set win the bid or win the package. The exciting thing is that airports are shifting away from those traditional bids and packages and they're being more accepting to brands coming to the table with, “We have an idea for you. We have a proposition and we want to change the mindset within this particular terminal.”
Adrianne: Let's talk about what's changed here. Airports used to be the last place anyone would want to spend extra time. Now marketers are asking travelers to come early and stay late. What's changed that makes this a possibility?
Ty: To me, technology is still the driver of everything. Where retailers have an opportunity to actually get time with people is left more and more to captive locations like an airport. There's a great opportunity to take that opportunity and turn it into something that's really experiential.
All the retailers there did a pretty swift business anyway. They were doing really well, and the airport makes a lot of money from retail, because people are generally idle there. “Oh, stuck in the airport. My plane's delayed. I guess I'll buy something.”
I think the other part is that airports and cities themselves want to be able to attract people. They want to be able to show off. This is a very important entry point into their cities, and they want it to be an amazing experience.
Robyn: I think they're awakening to the fact that they actually have an ecosystem. They have people's lifestyle and day to cater to, whether it's with a great dining experience or a great shopping experience, so that it becomes memorable as part of that overall journey.
Ty: Airports, in my mind, still operate in 1984, and they want your fax machine. If you go to an airport conference now, you'll hear buzzwords like, “How do we cater to the Millennial?” Then they all look around and they say, “Who knows what a Millennial is?”
For brands like ours, that are trying to innovate, there's this very uphill challenge for us. They all know that they need to do something. They know that there's a new wave and a new appetite out there, but it's not that the current lineup is suffering per se.
Adrianne: What are some other challenges that you are experiencing beyond just dealing with the airport itself?
Andrew: Any time that government agencies are in place there's a lot of process, both in being able to secure an opportunity and then executing on that opportunity. For New Stand, we don't operate our stores within airports.
In the same way, if you go to a Starbucks, HMSHost is operating that in an airport. We have an operator that's operating New Stand. For the store, we're still developing a concept in real time. We're doing that in partnership with an operating company.
That's really hard to do, because you're very precious about a brand and trying to create an experience, and yet you're not going to be able as an early‑stage company to deploy 20, 30 million dollars in capital to build something out. It's not realistic.
I think the strategy that we've deployed is really smart. Then, for certain kinds of businesses, we want to be able to develop an ongoing relationship with people. For us, it's really network‑based.
People who get on the NYC Ferry are now going to go to Newark. We're opening four locations. Or they're in an office building on the West Side, and then they're going to go to the airport, and they get to carry the same experience with them.
They have the New Stand app, the same points or awards. But people who just experience us within an airport realm, it's a very transient interaction, so we'll have to learn about that as well.
Robyn: One of the things that we've seen shifting as a pretty significant opportunity is that airports were very driven by sales per square foot. What we are seeing is now they're being much more open to the consumer insights that we are able to bring through our clients. The duty‑free retailers, they have so much consumer data. They capture everything.
They know which flight you're on. They know where you're headed. That info we can relay now to the airport because we can take that habitual patterning that we see and show how that is creating opportunities that they're missing out on.
Adrianne: How are you marketing your brands? Are you doing any advertising outside of the airport?
Ty: One of our biggest challenges is just‑in‑time marketing. If you're at the airport and you're in not a hub‑based terminal, you might be seen once or twice a year by that same passenger.
You don't want to let them know of your presence right before they jump out of the gate, because there's not enough time for them to take advantage of your sales and your value proposition. If you alert them of your presence six months prior to their arrival, they're going to forget about it.
How do you hit them as they're getting to the airport 24 hours in advance so that they can plan on you? There's an educational component to it. In the airport, advertising is just not worth the bang for buck for us. It's very expensive. Most people are going through the airport watching their phone.
They really aren't necessarily looking up at the Rolex picture that's standing up beside them. We're trying to do all of our advertising digitally, a lot of social media, Facebook and Instagram and then using proximity fences around an airport. We know you're within two miles of that airport, so we're going to hit you with a blast about what it is.
Our next stage in our development is creating an app, so it's interactive for consumers. Right now, we just have a web portal. The goal of that is that it ties into your flight itinerary so that we know what airports you're going through, and that we can send out catered content and promotional services 24 hours in advance, or 12 hours in advance. We still have more innovation to do on that side. Just‑in‑time marketing is the next frontier.
Andrew: We don't do any outbound advertising. The whole point of what we're doing at New Stand is to put the stores in places where you can't avoid it. We're literally on the [Staten Island] ferry. In LAX you actually walk through security and you're dumped out into New Stand.
The whole point is to use the interactions that we have with people, and then build upon that to actually create a deeper relationship with that audience that we can then partner with brands to connect them into that audience in a much more meaningful way.
Right now, there's a contract. JCDecaux has a contract for all the vertical wallspace in an airport. That's the advertising contract, and yet there are all of these stores that are doing product placement, doing showroom, and doing, “Hey, I have an app.” The airport authority's like, “Wait a second, I want to get a percentage of the sale and stuff that you're doing, ecommerce that actually happened on my footprint.”
They're going to want to have a piece of the media. It's going to be a reckoning at some point as media and retail become one. How that actually plays out in a hyper‑competitive captive space, we'll see.
Robyn: Building off the marketing piece that you were just talking about, for some of our clients, that challenge is that that JCDecaux has those advertising rights. How do they speak, and how do they convey a story that speaks at a higher level to that, and creates something that's more engaging and more immersive?
What we're seeing some of our clients do from a more built and environmental standpoint is almost in opposition to that.
They're using things that we're calling part of a day‑parting experience, or part of a popup experience to create events and moments that challenge the lease line and create engagement at a physical level of trying a product.
That's creating a level of engagement that seems to be getting a little bit more buzz within the social sector of the guests. The guest is taking pictures, tweeting about different experiences.
Adrianne: How do you enable experiential retail in this context?
Ty: I would argue every day for us is an event. The new experiences are marketing for a brand. That's the big shift that's happening.
Andrew: There's a lot of things we actually have in the works around that right now beyond doing really cool moments, like in partnership with Red Bull, at NYU and creating incredible popup when people are studying for finals.
Also, within our stores themselves, having an app that people love combined with physical space is a really powerful combination. You're going to start seeing in our stores “a wall of winning.” It sounds cheesy, but it won't be. You'll be able to open up the app and it opens a camera. You'll scan a QR and it's going to launch a scratch-off game or a wheel and you can win stuff. It's just a fun moment for you to have this extra experience within a store.
We've always tried to create moments like that. We've done massages on Tax Day at Brookfield Place. We've done wine tastings. We try to create an atmosphere that is celebratory on an ongoing basis because that, to us, is what day improvement is as well.
Robyn: It's important to understand the fluctuation that does happen within the day, and how you need to speak to those different consumers at those different times. One of the things that the airport, in general, doesn't do really well right now is communicate what is happening throughout the airport.
Right now, it's still a mindset of challenging the consumer to think, “It's OK to go past your gate. You've got plenty of time. You will get back to where you are,” because otherwise, you're only exposed to the concourse that you're in.
The airports really need to push the marketing further that, “Hey, just one concourse over, there's this great restaurant, retail experience, whatever it might be.” That just gets people more active within the airport.
Ty: I have a perfect example of how some airports are progressive and trying to figure out how do we get you to walk past your gate. Jet Blue at [JFK’s] terminal five is now going to be getting rid of each gate assignment. Instead of showing up and saying, “Oh, I know my gate is here,” three hours in advance, you'll show up and it'll just be an unknown.
They will tell you your gate like 30 minutes before it happens. The goal is, instead of having people congregate around one bottleneck up at the airport, you'll just float around because you won't know where you're supposed to be going.
Adrianne: We talked a little bit about technology. What else about apps can help draw people in? Ty, you mentioned that you guys are working on an app. What's the role of technology in all of this?
Ty: Right now, if you want to bypass and you want to explore a brand, it's just all done through our website and our web portal. We're building an app. You guys already have it. The main core of your lineup is already an app. It's a perfect avenue to go within the airport. Everyone's already on their phone. They're using it as their boarding pass. It's their entertainment. It's everything.
If you can get them to engage with your app, there's so much more brand content, but also follow‑up sales that can happen through that. To me, it's the next level of airport experience. That's why a lot of airports are building their own apps. They want you to be able to see everything that's available.
Andrew: It's going to be interesting to see the form apps will take. There's always been a bundling and unbundling that exists within technology overall. It goes back and forth.
You look in different markets in Japan and there's highly‑bundled apps. This thing does everything. That hasn't been the case as much here, certainly not in the last several years. I don't know if I need a remote control for my airport experience.
I don't know if I need a remote control for a building, like, “Oh, you can order food. You can book a car. You can find a conference room.” Seamless is good. Uber's fine. It's not a really big, hard thing for me to switch from one app to the next.
What's the purpose of there being an app for a terminal? I need to figure out where my gate is? I need to figure out what the food offering is, maybe? There's so much information that's already readily available that I don't know what the function is going to be.
There's a whole other realm of IoT, smart buildings, and people knowing, OK, this person has now passed through security and you can serve them this offer via push notification.
A lot of that's going to get into some pretty creepy stuff from a data perspective, because you're now coupling what's happening with security protocols with, “Hey, would you like a free s'more if you stop by this place?” The technology's there. I just don't know if [consumers] want to go there.
Ty: To every retailer, to every brand, to every restaurant in an airport, there is value for that brand to have an app. You can generate data from that. You can tie into their flight itinerary.
The challenge is, how do you make that app relevant for the traveler? How do you get them to download it and engage with it? There's going to be a lot of pointless apps that come out. They'll make it first without realizing what's the value proposition.
Andrew: What's really interesting right now is seeing Amazon through Go, now going into airports, going into small footprint locations that are owned or operated by big REITs.
They're going in there to own the customer, to learn more about who that person is when they travel, what they need, what they want. All it does is whittle away at the last bastion of what these asset owners have. Westfield operates major terminals. They also own big malls. Do you want to rent space to them or not? They will. They should. It's a little bit of keep your friends close, enemies closer.
It's going to be really interesting on the data side to see for big platform companies like Amazon, how they find their way into these spaces, why they're doing it and how much the people who are actually the providers of those spaces want to allow that.
Adrianne: What do you all envision for this category in 10 years? What are we going to see—order online, pick up in airport?
Ty: What's possible is very different than what's going to happen. The possibilities are endless. The summary of this panel is that airports provide a tremendous amount of experience, there's a captive audience, and they're ready to spend money to reduce the pain point of the dreaded dwell time. That will always exist.
I don't think it's going to get any better regardless of technology. There will always be security threats that make TSA lines longer. That will always exist. It comes down to: how quick will the airport allow innovation to happen?
What's going to halt innovation and what's going to slow it down is the airport mindset, a lot of the structure that's built around how the bureaucratic airport environment operates. That's going to dictate it.
I see an airport future of more services. You'll go and you'll have a business center. There'll be a mini WeWork in that airport. You'll be able to get your hair cut. You'll be able to go see a doctor.
Andrew: I think of it more in terms of what will happen from the transportation perspective. Autonomous vehicles will change a lot of what's happening. We'll see what happens with hyperloop, from The Boring Company.
I really think that there's a lot of things that are happening in transportation that will change what are the mainstays of airports right now and airlines, in terms of how they can make a margin based on short-haul flights and being full in certain ways.
I also think what will be interesting to see is how the government ultimately allows for more convergence within businesses. Will you be able to fly Amazon airlines?
At a certain point, if you're selling stuff on the flight, if you're selling stuff as part of a services package, they're already selling me toilet paper and delivering it and they also give me movies and everything else. Why should they be in travel and everything else? That will start to change things.
The last thing that will be interesting to watch is just the continued bifurcation from a socioeconomic perspective. Private flight is getting cheaper and cheaper and so is being part of a flight club. I'm going to go to a smaller local airport and be able to check in there. I pay a little bit more.
Robyn: Changing the mindset is exactly what needs to happen. The airport right now needs to take that idea that they're an airport and they're servicing. The opportunity for the services and the experiences that could happen within this space ultimately is transforming it into a destination that people want to stay in, rather than simply pass through.
Adrianne: We'll check back in 10 years to see what's happened.