Marketplace of the Sky: how does connectivity unleash duty free revenue opportunities for Airlines

Duty Free is a booming market: the 1.3 billion international passengers spend every year almost USD 50B in Duty free in Airport and Aircrafts. This amount should double within the next 10 years.

However, out of these 50B, less than 10% are done by the airlines.  The reason is quite simple: the shopping experience of duty free products in a plane is not adapted anymore to the level expected by the consumers. Ground duty free retailers propose luxury malls, whereas inflight, passengers can only read through the duty-free magazine in the seat pocket and its little selection of products. And from an Airline point of view, it brings lots of constraints – complicated logistic, cost of transportation of useless weight from heavy trolleys … Declining turnover, minimal margin and important complexity have lead some of them to shut down this business.

However, Airlines have 2 major assets for a shopping experience: time available and passenger data.

Inflight connectivity enables to make the most of these assets, and thus represents a significant opportunity for the generation of ancillary revenue: Airline can know propose, on passenger’s personal device, a new e/m-commerce experience. Content and offer personalization, based on passenger data, will lead to a signification increase in conversion and in spend per pax. Dr Alexander Grous, in a recent study from London School of Economics, estimates that the retail opportunity for broadband enable Airlines will reach USD 18B by 2016.

However, to efficiently operate e-commerce in the sky, some problematics must be overcome.

The first is the quality of navigation that Airlines can offer to their passengers. If there are huge progress made year over year in the quality of satellite bandwidth, it remains limited compared to the one customers are used to on the ground – and expensive for the airlines. When we know that in e-commerce, loading time is the major contributing factor to page abandonment, using traditional websites systems, that requires dozens of second for each page load inflight, is not an option. That’s why our solution, airfree, is specifically adapted to inflight browsing: with its innovative technology based on minimal & smart usage of bandwidth, it allows fast and cost-effective navigation.

The second problematic is the product offer that the Airline can propose digitally to its passengers. The 200 products from its current inflight offer seems to be a poor answer compared to the choice that passengers have on the ground. That’s why Airlines should rely on the ground Duty Free Retailers product stock.  In that context, the airfree marketplace model is the most relevant: Duty Free retailers become vendors of the Airline Inflight Marketplace. By relying on a third-party intermediate that has the ability to plug into an unlimited number of vendors who offer their products and services to an unlimited number of airlines, the marketplace enables global coverage and ultra-scalability, while releasing the Airline from all weight & logistics constraints. By adopting a revenue sharing model, it will bring incremental sales to all the stakeholders in the Duty Free Industry: Airlines, Retailers and Airports.

 

Agnès Debains is the co-founder & Marketing Leader of airfree, the Marketplace of the Sky, and an active advocate for the Digitalization of the Air Duty Free industry.

www.airfree.aero