All too often when we travel by air, we wonder why we cannot have a good quality food or a gift shop where we can spend some time. How many times, when you were waiting in a terminal, you wished there was a spa where you can get a foot massage. Well my friends, things are changing and changing rapidly. Let me take you through the speed at which these new terminals of Indian airports are catching up with the international concepts and experiences. I am referring to an altogether new area of retailing revolution in India, Travel Retail.
It has been a practical no brainer that we are country which is in the build phase. What it means is; we are watching the construction of big and broader highways, more airports, better railways stations and an increasing number of metro network. We have all seeing 15+ % growth of sales in cars and other motor vehicles,18+% increase in air travel and similar trends in other forms of travelers. Indian is travelling and traveling big time. Needless to say, as we travel more and more, so will our “need to spend”, “eat” and “shop” increase throwing opportunity in this space of travel retail.
One of key area where we have seen sudden growth is in airport retailing. Across the world airports generate more that 40% revenues on an average from non-aeronautical commercial streams and there is no reason why Indian airports won’t see such trends. We have been watching the development of “World Class” terminals like the new T1D domestic for New Delhi Airport and more such in Hyderabad and Bangalore. As the airport developers (DIAL, MIAL, AAI etc) feel the pressure to generate revenues and money from various available resources, the need to create experiences for travelers to shop will increase. Needless to say, they have already tasted blood in the form of revenues from these spaces, whether it is retail, food or lounges. Take the case of Delhi’s new terminal, it has all the making of a great terminal experience, it has all the categories of products and services which a traveler needs but was never provided in our old fashioned terminals. We have books & music, Electronics and eyewear. Then we see interesting ideas around gifting, Indian Handicrafts and fashion.
The story is same on the other side of the table. Indian retailers are seeing some of the best performances in their stores in these airports. Be it Odyssey, Fabindia or electronics brand like Croma, all of them have sales and productivities from these terminal stores which is 3-4 times higher than their high-street/mall stores. Here I am not even talking about the interest levels of established international travel retail players who are big in duty free and other established categories. What does this all mean? It only means that airports have a captive set of people who are “high on cash” and “low on time”. It also means that Indian players have a big opportunity to develop concepts and formats suiting the Indian traveler as well as the international traveler who would like to take a piece of India while leaving this great country.
Some of you would be thinking, what about setting a shop in our bureaucratic setup? What about rules and security and procedures? Agreed that there are many bureaucratic processes and hassles in opening and running a store in an Indian Airport, but let me assure you, it’s the same case anywhere in the world. Airports are the hotbeds of political interference and procedural nightmare. The fruit of the labor is high volumes and margins and returns within a very short period of time. Not to forget the fact that retailers and brands get to showcase to a select and targeted set of people who are on top of the pyramid. Retailers have to always remember the golden rule for airport retailing, “Give them an offer which they cannot refuse”. Making the store open, merchandise interesting and alluring and price points competitive. This will ensure traveler shell out cash and spend and spend happily.
With 100+ AAI airports and out of which 20+ can be high potential airports, things look better and better. We already are on the verge of seeing the unveiling one of the largest airport terminals in Asia that is the T3 terminal in Delhi. This will be shortly followed by the new terminals for Mumbai. All this will see travel retail business in India shooting way past the 1000 Cr and well on its way to higher numbers. Here I am just referring to retail, food and lounges. We will talk about other avenues of revenues like advertising, car parking, hotels, business parks etc some other time.
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