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| Harrods at Heathrow |
Luxury sales are flying high at most airport duty free outlets…but are these at the cost of margins? The short answer is “No”. The costs of maintaining airport outlets are usually set off by the savings in allied costs. Heathrow for instance charges nominal rent but takes a percentage of revenue generated at its outlets - with 70 million well-heeled passengers passing through every year with cash and time to spare, it’s betting big on its ability to drive sales. This is borne out by the staggering GBP 2,782 it generates in sales per every square foot of retail area. Compared with the GBP 1000 that Harrods generates at its Knightsbridge Store in Central London, this confidence in its ability to convert footfalls to sales is well justified. It works perfectly well for the retailers as well – most luxury outlets in major cities would need to fork out big money to keep up the high levels of security and store fronts 24/7. Security and round the clock store timings are far easier to achieve in a highly secure airport setting and yet achieve high average spends per shopper (average of GBP 38 per shopper at Heathrow)
Besides being able to attract busy travelers with money but no time and last minute shoppers, airport outlets provides two major benefits to luxury retailers over the high street:
1. Access to an international clientele – from BRICS and other emerging economies who might not regularly be able to shop at European high streets but can still say “I bought this in Europe”
2. Avoid issues with excess baggage, packing and security for items like premium wines, jewelry and food (Paris CDG offers special travel packaging for their more “smelly” cheeses)
All of the above are contributing to sales at airport outlets growing at 14% p.a while high street sales are struggling to achieve single digit growth rates
