Pandemic Pushes Airports & Travel Retailers to Pivot to Domestic Shoppers

Kevin Rozario

London

November 11, 2020

Hong Kong Star Ferry sailing through Victoria Harbour source HKTB e1605248772644

Travel retailer, Gebr Heinemann, and key Asian airport hub, Singapore Changi Airport, have both widened their retail offers to domestic consumers in order to claw back some lost revenue caused by lockdowns and flight restrictions. Last month, Germany-based Heinemann opened a pop-up store in the downtown Central district of Hong Kong, which will be open for a whole year. The outlet will showcase “some fun new brands in a flexible and fresh environment” according to Victor Chan, General Manager at Heinemann Hong Kong. “This store will allow us to re-open and recover at the airport while managing and mitigating inventory risks,” he said in a social media post. Heinemann has multiple confectionery stores at Hong Kong International Airport where traffic has plummeted. In September passenger numbers were down by 98%, similar to preceding months according to the Civil Aviation Department of the Special Administrative Region of China. At Heinemann’s headquarters in Hamburg, a company spokesperson said: “We have opened domestic pop-up outlets in Hong Kong to clear inventory—primarily confectionery—and generate revenue for the company during this time of crisis for the entire industry.” New Sales Channels  Could the move be the beginning of a broader diversification into domestic retailing, given that the pandemic is regaining momentum? The spokesperson was clear that Heinemann was “currently” not planning to open downtown pop-up stores in its home market of Germany or elsewhere in Europe. But in relation to Asia Pacific she said: “We are constantly evaluating new markets and sales channels to drive our business growth in the region—with these plans continually evolving. Nearly every single one of our airport shops has been closed since March due to the pandemic, which has made securing new sales channels essential to our business at this time.” Dufry, in which Alibaba took a stake this month, has some existing outlet stores but said that it has not, so far, opened any new ones in the domestic market in response to the pandemic.

Pricing on GetIt competes with local market e-commerce players

Meanwhile at Singapore Changi—a rival hub to Hong Kong International—the airport’s operator, Changi Airport Group, has developed an e-commerce website called GetIt that is dedicated to Singapore’s domestic consumers. This is in addition to its existing iShopChangi platform which serves both travelers and non-traveler by offering what it describes as “tax-absorbed shopping without flying.” The site was where South Korean retail giant Lotte Duty Free initially launched its airport liquor contract. However, GetIt has created tensions for Changi’s retail concessionaires at the airport as well as brands, according to The Moodie Davitt Report. A number of sources have told the site about their concerns which range from parallel procurement to price undercutting. However a spokesperson at Changi Airport Group, said in a statement: “GetIt by Changi Recommends and iShopChangi are two distinct platforms to meet the needs of different customer segments. The brands that we have talked to agree that the e-commerce market is increasingly dynamic and they themselves are rethinking the traditional differentiation between travel and non-travel retail. “Changi Airport Group has always viewed locals in Singapore as our closest customers. We are keen to serve them through our e-commerce channels even when they are not travelling.” Price Variations However, running two e-commerce websites can inevitably lead to pricing variations, especially as GetIt is competing with very competitive e-commerce websites. For example, on iShopChangi, a 0.75 litre bottle of 18-year-old Glenfiddich, fulfilled by Lotte Duty Free, costs S$138 for travelers, whereas local shoppers can buy a 0.7 litre bottle on GetIt for $117.00. The price differential in favour of local shoppers undermines the concept of duty-free savings for travelers. But right now, when there are barely any passengers around, the airport is taking a more pragmatic view. “Regarding pricing, we do not have a strategy to price dump, but sometimes we may be below the recommended retail price if this is what the rest of the market is offering. We have to be competitive, for our business to succeed,” insists Changi Airport Group.

The iShopChangi website was originally developed for travellers

The airport operator adds: “We take the greatest care in how we source products and deal only with legitimate distributors, whether through their travel retail or domestic arms. For those unable to supply us with products our customers want, we speak to reputable parallel importers. Sourcing from these suppliers is common and legal in Singapore. For some high-demand categories, they offer very competitive prices benchmarked against other e-commerce platforms.” Like Hong Kong, Changi’s air passenger numbers in the past few months have been down by more than 98% and e-commerce is seen as a necessary way to pivot into other income streams. “Covid-19 has decimated aviation and travel retail. Airports and brand owners recognize the urgent need to actively explore new revenue sources, including domestic non-travelers,” Changi Airport Group believes. Airports extending their retail reach to domestic non-traveling shoppers is not new. In Canada, Vancouver International has a joint venture (50:50) partnership with outlet mall expert McArthurGlen whose 70 designer stores operate on its property on Sea Island close to the airport. The project launched in 2015.