Can Mexico Lead A Revival Of Dufry’s Travel Retail Business?
The post-2008 financial crisis has battered the travel retail sector, with many traditional retailers filing for bankruptcy protection and others struggling to survive. In response, many of the sector’s leading players have been experimenting with new formats, services and distribution channels. The result has been a mixed bag. While some new entrants have thrived, others have struggled to gain a foothold. However, the retail landscape is changing again.
This time around, the changes are driven by new demand sources and a shift in consumer demand. While inbound travel and instant access to booking sites like Expedia and Orbitz are taking a toll on margins, new demand sources and an increasing emphasis on online sales are creating new growth opportunities for retailers.
What’s driving change in the travel retail sector?
The travel retail sector is currently witnessing a shake-up. As consumers continue to diversify their travel spending, retailers that have long ignored the online channel are starting to experiment with new online strategies and direct-to-consumer distribution channels. This is in response to a changing landscape that has left many traditional travel retail players struggling to survive.
These changes are also being driven by new demand sources. As e-commerce gains pace and traditional retail sales slow, the travel retail sector is seeing an uptick in inbound travel, which is expected to boost in-country travel spending by around 4% in 2019. At the same time, the rise of new mobile-first, cross-border e-commerce giants like Amazon, Apple and JD.com is fueling the growth of international retail sales.
New demand sources
The growth of new demand sources has been one of the most transformative trends in the sector over the past decade. From growing popularity of social travel networks to near-ubiquity of mobile devices, the travel retail sector has been forced to reorient its operations to cater to this new, mobile-first consumer demand.
Mobile-first, cross-border e-commerce giants are now a part of everyday life for many people. For the first time in history, the travel retail sector is facing intense competition from online channels. This has forced many retailers to seek creative solutions to keep up with shifting consumer demand.
Online platforms and direct-to-consumer strategies
In the past, many travel retailers were focused almost exclusively on in-store sales, which created a natural monopoly in some geographic regions. However, as online booking channels and consumer reviews grew in popularity, many retailers found themselves challenged by fierce online competition. To boost sales and retain market share, many retailers began to experiment with new online strategies.
While many still rely on traditional retail sales through their own brands, a growing number of companies are experimenting with direct-to-consumer strategies. By partnering with online travel agencies (OTAs), airlines and hotel chains, retailers are leveraging their strengths in marketing, customer service, product expertise and distribution to offer better online shopping experiences for customers.
Changing consumer habits and travel tech trends
The travel retail sector has been through a series of challenging trends in the past decade. From the financial crisis to the growth of online booking channels, consumers have changed their travel habits, and retailers have had to adapt to this new demand source.
As a result, many traditional travel retail players have been forced to close their doors. New retail entrants that have entered the market, however, have been quick to spot and respond to these changes.
New travel tech trends are also having an impact on the sector. From growing adoption of facial expressions and emotion-based technologies in customer service to adoption of virtual reality (VR) and augmented reality (AR) in store experiences, many retailers are exploring how this new technology can improve customer experiences.
The rise of e-commerce and omnichannel strategies
The rise of e-commerce and the omnichannel shift have had a far-reaching impact on the travel retail sector. By leveraging the strengths of both e-commerce and travel retail formats, many retailers are better able to respond to changing consumer demands and expectations.
For example, some retailers have started selling airline tickets and hotel bookings online, but still maintain a presence in-store to provide a more complete travel experience for customers. Other retailers have focused on developing unique online shopping experiences that complement their in-store experiences.
Still other retailers are using the omnichannel approach to deliver both online and in-store experiences. By leveraging their strong customer connections, retailers can improve customer experiences by responding more quickly to customer service needs and bundling travel and retail products.
The travel retail sector is currently experiencing a shake-up. Consumers are diversifying their travel spending and retailers are responding by experimenting with new online strategies and direct-to-consumer formats. This, in turn, is driving change in the industry.
The sector is, once again, experiencing transformation and a wide range of opportunities for retailers. With e-commerce and in-store travel retail sales experiencing a decline, the time to enter the travel retail market is NOW.