Industry Analysis

Clare Williams of Templemere Public Relations explores the impact of the dramatic increase in passengers travelling from and around Asia on the travel retail sector.

Ask anyone who works in international travel retail what are their key priorities and ‘expanding in the Asian market’ is bound to be towards the top of their list. Undoubtedly, the potential for growth in this sector remains phenomenal. The latest data from ACI shows that Asia-Pacific airports reported overall growth in passenger traffic of almost 6% for the year in 2014. While growth in many of the region’s major airports is slowing, China, as a whole is still posting growth in the realm of 7%.

So how does the travel retail sector capitalise on this expansion? And when it comes to shopping or eating at the airport, what does the Asian passenger want, and how does the airport, retailer or brand meet those needs?

More than one market

Firstly, those with experience of this vast and diverse region would agree that ‘the Asian passenger’ cannot easily be pigeonholed, and one size does not fit all.

Prosperity across the region differs widely, and this is of course reflected in the demands of the passengers from each country; the seasoned, affluent traveller from a mature economy will not be looking for the same experience as someone from a developing country who may be a first-time flyer. Antonio Persson, director brands and client relations for food and beverage operator SSP’s Asia Pacific region explains: “In our airports across Asia we are catering for a wide range of people, from those who are looking for quite basic food and beverage offerings to those with very sophisticated tastes who are used to a high quality experience.”

According to Miriam Richter, marketing manager duty free for Lindt & Sprüngli, demand, as well as taste, also differ widely when it comes to choosing confectionery. “Generally speaking, sophisticated packaging that is suitable for gifting is very important to Asian travellers as most of their purchases in duty free are to take home as gifts from their travels. However, there are differences between nationalities: in general, Chinese passengers prefer to choose international, well-know brands and will often opt for flamboyant packaging, while Japanese passengers look for elegant, under-stated designs.”

Rising standards, rising demand

Across the region, the needs of the Asian passenger are certainly becoming more and more refined, and there is little doubt that quality is rising up the agenda. Over many years, SSP has been conducting a major consumer research programme which classifies travelling consumers according to seven categories. The number of Chinese passengers who fall into the most discerning of these categories (which SSP terms ‘experimental food lovers’) has risen from 8% in 2007 to 26% in 2013, compared to a global average of just 18%. In the same study, a very substantial 91% of Chinese passengers said that they expect airports to have first class facilities, significantly more than the global average of 73%.

LINDT found similar evidence of increasing appetite for the finer things in life. A study it conducted in autumn last year at Zurich airport found that Asian passengers account for 19% of the sales of mass-market confectionery products, but this figure rises to 22% of premium brands.

Persson also believes that his customers are increasingly looking for an authentic experience. “They have a better understanding of a wider range of foods, be that Korean, Hong Kong or Indonesian, as well as western cuisines such as Italian, Spanish or British. In the past, most airports offered mostly generic brands. But our customers know the best brands in each category and these are what they want when they travel.” In recent years this trend has evolved even further. “Today, the more ubiquitous international brands are being replaced with on-trend local brands such as Korean lifestyle café brand Cafe Bene or boutique style coffee brands. Traditional casual restaurants such as Element Fresh, which serves healthy salads, juices and light dishes in a contemporary setting are spreading fast across China. All of these brands pay great attention to creating a total experience with a mix of great design, great food and personal service. Going forward, there will still be a place for the international brand, but it will be the more sophisticated offers that have a role to play rather than the mass-market.”

According to Richter, the picture is the same in the confectionery sector, where authenticity is a major attraction, and there is considerable appetite to learn about the history and provenance of a product. “Chocolate consumption is on the rise in Asia, but it’s still not eaten as much as in, say, Europe. However, Asian consumers are keen to know more about where chocolate comes from and how it is produced, and they appreciate brands that have an established heritage and a good story to tell, such as LINDT, which has a long tradition in Swiss chocolate making.”

Pricing matters

While incomes in the region may be on the rise, it would appear that Asian travellers are not reckless in their spending. LINDT’s study found that when it comes to their reasons for visiting the duty free shop, Asian customers were the most likely to cite value for money as a main motivator. 45% said they were looking for a bargain, compared to 39% of Americans, 27% of Russians and just 15% of travellers from Arab countries.

Persson notes that when choosing food and beverage, Asian passengers won’t spend if they don’t feel it’s necessary. “A food lover in Bangkok, no matter how wealthy they are, may choose to eat on the streets. That’s because that’s where the good food is, and they don’t see the point in spending any more.”

Cultural influences

The fact that Asian passengers are more likely to purchase confectionery as a present than they are to buy it for themselves can have a significant impact on the way products should be displayed and sold, according to Richter. “It’s important that we stock products that are suitable as formal gifts. We also need to ensure that we have large quantities of the same products, as Asian customers often want to buy multiple gifts that need to be perceived as being of equal value.”

The Asian traveller abroad

As more and more Asian travellers take to the skies, Richter believes that appealing to the Asian passenger outside the region is also becoming ever more important. “We need to think about products that will attract these customers, and gift items such as the newly launched special edition LINDOR Chinese New Year Tube are one way to tap into this demand.”

Persson agrees that airports could go further to ramp up their engagement with the Asian passenger. “At many airports, there is little that resonates with Asian travellers. These passengers know good Asian food. They know ‘the real deal’, and that’s what they want to see at the airport.”

The Asian travel retail market is complex and the secret to success within it is not straightforward. But for brands, airports and retailers with the right approach, the potential is, and will continue to be, enormous.

This feature is based on an article that was first published in the “January/February 2015 issue”:http://www.airportsinternational.com/magazine/view-issue?issueID=6336 of Airports International magazine.