Retail biz breathes life into airport revenues

The COVID-19 pandemic may have had a significant negative impact on air travel in China, but it has also brought new development and upgrading opportunities to domestic airports' on-site retail business.

Unlike railways and bus stations and cruise terminals, airport on-site shopping arcades, especially their duty-free shops, are known to enrich overall travel experiences of passengers, industry experts said.

That's because airports serve as gathering places for medium-range and high-end consumers, particularly when they wait to board their flights. Impulse buying is recognized as a significant booster of sales at venues like airports.

Before the pandemic, many luxury brand stores at airports saw faster sales growth than at department stores, according to consultancy Bain& Co.

"For airports in China and abroad, the layouts of commercial areas in airports are closely related to the functional positioning and market structure of specific airports, and brand layouts can be quite diverse at different airports," said Zou Jianjun, a professor at the Civil Aviation Management Institute of China.

According to Tianyancha, a business information provider, a newcomer on the list is luxury brand Louis Vuitton, which is reportedly about to open a store at terminal 2 of Guangzhou Baiyun International Airport. The store is expected to open this year, becoming the first top luxury brand to open a shop at Guangzhou Baiyun International Airport.

Baiyun beat Hartsfield-Jackson Atlanta International Airport as the world's busiest airport in COVID-wracked 2020. Moving up from 11th place in 2019, Baiyun topped the list due to China's effective control of the pandemic, according to data from the Airports Council International.

In recent years, luxury brands have increased their stores at major domestic airports. At Beijing Daxing International Airport and Chengdu Tianfu International Airport, which started commercial operations in late 2019 and June 2021, respectively, there are already stores of top luxury brands such as Hermes, Louis Vuitton and Gucci.

In 2019, before the pandemic, the non-aviation revenue of Beijing Capital International Airport accounted for 62 percent of its total top line, while the corresponding figure was 53 percent for Baiyun, according to their earnings reports.

Since the pandemic, duty-free business at Baiyun was hit hard; yet, there were not enough high-end stores to attract more customers.

Besides duty-free stores, most other commercial establishments at terminal 2 of Baiyun are restaurants, convenience stores, pharmacies and stores that sell snacks. The airport said it is endeavoring to attract more luxury brands.

With the airport retail business set to become more comprehensive at the Baiyun airport, it is expected to create more vitality in the local retail market of Guangzhou and the Guangdong-Hong Kong-Macao Greater Bay Area, according to a forecast by Zheshang Securities.

The Civil Aviation Administration of China has begun collecting good examples of viewing facility building at different domestic airports. The authority would like to speed up the launch of an official guide to airports' shopper-friendly viewing facilities.

When the guide becomes available, consumers will be able to know the best locations to take photos of aircraft takeoffs and landings, and some good spots to enjoy the scenery.

Leisure and entertainment facilities, restaurants and retail stores at airports are expected to help enhance the experiences of passengers. Such spaces will also be helpful to popularize aviation knowledge and culture, the CAAC said.

Offering leisure spaces with distinct features can help airports promote their image, enhance overall services, and fuel more business growth opportunities. It can also help drive the growth of a group of related sectors, the CAAC said.

This year, cultural and creative store Dongxi, which is self-owned by Shanghai Pudong International Airport, started operations at the S2 satellite terminal of Pudong airport. Opened in 2019, the H-shaped satellite hall is the world's largest single-building satellite terminal.

At the beginning of the store opening, Dongxi cooperated with other stores to launch promotional sales. If consumers make purchases at Dongxi, the receipts thereof will bring some discounts at other stores, Pudong airport said.

The store offers gift items like scarves, lampshades carved out of paper, cups, and various products with distinct Shanghai features. It has helped further expand the cultural attributes of the airport. In addition, a number of coffee shops, bookstores and luxury stores are available at the terminal, which provide memorable, stress-free shopping experiences for passengers.

At Beijing's two airports, in the countdown to the 2022 Beijing Winter Olympic Games in February, a number of cultural and creative stores that sell related souvenirs have been launched. Stuffed toys, T-shirts and commemorative badges at the stores have attracted the attention of passengers.

The commercial unit of Beijing Capital International Airport cooperated with China CITIC Bank to launch a promotional event at the two airports in the city on Nov 29. The event will run till April 30.

They cooperated with nearly 150 brands that have physical stores at the two airports, and participating brands include Pandora, MCM, and Quanjude－a chain restaurant known for its Peking roast duck. Passengers who pay with China CITIC Bank credit cards can enjoy certain discounts at these stores.

Retail activity at domestic airports is not limited to major cities such as Beijing, Shanghai and Shenzhen in Guangdong province. In Southwest China, Guiyang Longdongbao International Airport officially put its terminal 3 into use in mid-December. It is Guizhou province's first intelligent airport terminal. It allows passengers to check in their luggage by scanning their ID cards, and pass through security checks by facial scans.

The terminal has established different commercial areas with different themes, which showcase local cultural elements and natural scenery of Guizhou. The airport said it has allocated special funds to ensure the fine decorations in these commercial areas, as they help raise the overall image and quality of the airport.

Meanwhile, Haikou Meilan International Airport in Hainan province has made efforts to showcase some prominent features of the tropical island. For instance, Terminal 2 of the airport launched various restaurants, chain stores and local brands with distinguished features.

"It was almost a disaster for the airport retail business right after the outbreak of the pandemic, as passenger flows plummeted. Also, some sanitation requirements and measures that encouraged passengers to shorten the duration of their stays have been direct shocks to the retail business," Zou said.

"Many airports are making efforts in improving their services and finding opportunities for transformation, such as speeding up online sales and promoting door-to-door mail services of products. These effects brought by the pandemic could be long-lasting. The future business model of airport retail is bound to be the integration of offline and online sales."

As younger generations of consumers have become increasingly reliant on online shopping, making more investments in developing the digital business has become more critical and even a must for retailers.

China Duty Free Group Co Ltd, a State-owned enterprise that specializes in the duty-free business, started to allow customers to purchase duty-free goods online and get them directly shipped home without traveling abroad since last year, as the pandemic has largely restricted international travel and significantly reduced passenger flows at airport duty-free stores.

As the pandemic prevention and control measures become more normalized in China, passenger expectations of self-help and contact-free services has further prompted more offline businesses to shift their services online, industry experts said.

zhuwenqian@chinadaily.com.cn