Given that GTR is well established in terms of brand equity building – although in many cases much can be done to optimise this role – it is vital that brand owners acknowledge and develop the profit potential of this alternative route to the consumer, business-managing the channel in a way that reflects its unique attributes, without allowing any ‘special treatment’ to risk compromising the traditional business.
In other words, GTR can and should be treated as a standalone channel aimed at showcasing the brand, but needs to be managed within a harmonious multichannel strategy…
Despite the global recession, there has been a significant increase in the number of air travellers, resulting in a greater awareness among travelling-consumers of the advantages of duty free and travel retail shopping, even leading to the emergence of the ‘savvy travel-consumer’ in many cases… Meanwhile, travel-shop operators are learning how to meet travel-consumer demand in an environment where airport owners and authorities are becoming increasingly aware of the potential of duty free as a source of additional non-airline revenue.
Traditional global retailers have refined the science and art of shop-keeping, establishing standards that must be met in emerging channels by suppliers and retailers hoping to achieve acceptable levels of profitability. In other words, for GTR players to thrive, they need to match major retailer expertise in terms of knowledge of the consumer, both as shoppers and consumers, brand/private label balance, merchandising, space efficiency, price, buying and ranging, logistics, trade partnership, risk management, and overall business performance, especially ROCE, margin, and the use of capital.
Otherwise, suppliers paying what they believe to be too high a ‘brand equity’ price to fund GTR’s retailing inefficiencies will begin to reduce levels of trade investment and direct it to other channels…
Whilst some GTR operators have recognised and are demonstrating the need to change by employing key personnel from state-of-the-art retail, and focusing on basket-size maximisation, there is still an increasing need to adapt most of the other standards of state-of-the-art retail, or suffer loss of profitability. By the same token, suppliers hoping to optimise the commercial potential of the GTR channel need to manage the inevitable drift of good brands to attractive emerging channels in the face of flatline demand elsewhere. Also, brand owners need clear positioning strategies and co-ordinated management of all channels to avoid conflict with other parts of the business.
Moreover, it is increasingly important that prices and terms be transparent and defensible, given that its international spread makes GTR particularly susceptible to worldwide comparisons on every aspect of the trading relationship. This requires adequate knowledge transfer in terms of customer, country, region, and especially globally, in order to minimise potential compromise to any part of the business. This suggests that a team of functional specialists, managed, co-ordinated and informed by a global KAM is required for each of the major GTR players…
From an external point of view it is important that suppliers understand the different business models at play in GTR in terms of how the money works, revenue-streams, and sources of funding, with success requiring an alliance of landlord, travel retailer, brand supplier and duty free operator in order to optimise joint profitability.
Furthermore, it is critical to acknowledge the high degree of mutual dependencies in the relationship. In other words, the landlord provides the travellers delivering the traveller-consumer to the duty free operator. The travel retailers provide the shopping environment, opportunity and experience, whilst the brand suppliers deliver the brand recognition and values. The duty free operator can be the catalyst, allowing all four to optimise the joint opportunity.
As this four-party alliance develops, the question of ownership of the traveller-consumer will arise, and it is important that brand owners acknowledge the differing contributions of their partners to the conversion process. The landlord knows the name, travel class/status/frequency, and destination because of links with the airline, whilst the duty free operator is dependent upon what the landlord, retailer and brand owner are prepared to share. This means that the duty free operator needs to be an aggregator of traveller-shopper insight, and be encouraged to educate retailer-partners and brand owners… Meanwhile, the brand owner knows that the traveller-shopper is a little grey-haired old lady, living alone on the outskirts of Paris, two children having left home…
Compare with a mass-retailer’s knowledge of name, address, age, sex, family size, occupation, income, health, insurance cover, finances, shopping behaviour, pass-times/hobbies/travel behaviour – compared with Boarding-card information – to fully appreciate how far GTR still has to travel…
And if knowledge really defines ownership, then perhaps the mass retailer needs to be invited to the GTR party?
