As Deloitte’s latest Global Powers of Luxury report found, the world’s 100 largest luxury goods companies generated only $212 billion in 2015, down 4.5 percent year-over-year. Half of these luxury purchases, however, are made by travelers, a number that rises to 60 percent for those coming from emerging markets.
On the other hand, travel retail overall accounts for $63.5 billion in total global revenue and is expected to grow to $85 billion by 2020. Consumers from Asia are the driving force behind this trend, accounting for $24 billion of that number.
According to luxury and retail sources, the growth opportunity here is huge — seen as a potential lifeboat for prestigious brands whose relevance is waning with the rise of digitally-native, direct-to-consumer brands.
“Travel and experiences are the fastest growing sectors within luxury, and product-led luxury brands — including jewellery, watches, apparel, and beauty — want to piggyback off of that growth,” said Tammy Smulders, the global executive director at Havas LuxHub, Havas Media Group’s luxury consultancy. As per capita spend increases, so do the upscale offerings at airports, she said, citing London Heathrow airport’s Terminal 5 as a prime example. “People show up at the airport an extra hour in advance just to shop.”
“They’re catering to customers who are bored,” said Deborah Calmeyer, the founder of RoarAfrica, a luxury safari company. “Airports don’t create environments that people want to be in, they’re overcrowded and hectic.” The beautiful stores, on the other hand, are less crowded and peaceful, often playing into fantasies associated with travel or wherever a person is headed.
Most airports, of course, can’t hold a candle to the likes of South Korea’s Incheon International, the biggest duty-free shopping hub in the world. But that may be a boon to luxury sales, in the long run, said Calmeyer: “The longer airports take to clean themselves up, the better the opportunity for retailers — I’d much rather be looking at scarves in an Hermes store or trying on a Rolex than sitting at an overcrowded gate.”
Sales numbers aside, not everyone’s convinced that the optics are right for a luxury brand.
“The availability of luxury merchandise in airports and on cruise ships is part of [retail’s larger] problem, not the solution,” said Paula Rosenblum, a retail analyst at RSR Research, adding that these in-transit sales should be outliers for prestige brands rather than core to their business. “When something becomes so readily available, is it still a luxury?”
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