The 28th Airport Commercial & Retail Conference & Exhibition took place at the Harpa conference and music centre in Reykjavík, Iceland (18-20 March).

Consumers’ ‘supercharged’ expectations in a global retail climate facing systemic changes to its fabric has profound implications for airport retail, delegates were told at this week’s ACI Europe Airport Commercial & Retail Conference & Exhibition.

Addressing airports directly in a keynote address on Tuesday, Natalie Berg, Retail Analyst, Author and Founder, NBK Retail warned: “You either need to save customers’ time or enhance their time.

“If you think about how customer expectations will continue to evolve in the coming years, Amazon Go is coming to Europe and is likely to open in London.

“If being able to skim the shelves becomes a norm for a high street store, what will our expectations be in an airport where time is a precious commodity? We need to think about how consumers’ expectations are being supercharged and how that translates to an airport setting.”

Natalie Berg, Retail Analyst, Author and Founder, NBK Retail

‘PURE-PLAY ECOMMERCE IS DEAD’

In one of the standout presentations of the event, which took place at the Harpa conference and music hall in Reykjavík, Iceland, Berg provided a candid and analytical assessment of global retail’s evolving trajectory.

She began by asking what shopping means to people; today, the process is completely seamless through the likes of Amazon and its Alexa platform, where convenience is king.

“The consumer today has a lot of choice when we think about how we access brands,” said Berg.

“It used to be about online versus instore, but today you see the convergence of a number of touchpoints popping up outside traditional retail channels.

“We’ve seen a proliferation of delivery services – same day, next day, scheduled time slots… some retailers are opening the door to your house delivering to your fridge.”

Illustrating the fast transition to this ubiquitously connected society, Berg pointed out that a decade ago, the iPhone celebrated its second anniversary.

She said this has turned retail on its head, with two thirds of the global population now connected by mobile device. Drones, robots and voice assistance are now also a reality.

Amazon was also the 55^th largest retailer 10 years ago. Today it ranks fourth.

With the advent of click and collect, consumers have access to millions of products at their fingertips, continued Berg.

“Ecommerce is the holy grail – but pure-play ecommerce is dead. The role of the store was transactional, today they are experiential and having to redefine the physical space.

“In 2015 I predicted that by 2020 we would see the death of pure-play e-commerce and got a lot of raised eyebrows.”

Drawing on a quote from former Tesco CEO Terry Leahy, Berg said when it comes to the retail market ‘either you’re disrupting or someone is disrupting you’.

She continued: “In the future, we will see a growing disparity between winners and losers because what we are seeing now is retail Darwinism, it is evolve or die, it is survival of the fittest.

“We have to acknowledge that the sector is going through a huge and quite a painful transition. We will see more store closures, job losses and retail bankruptcies due to the inevitable shift as we spend more online – but it is not just online.”

 Berg: “We have to acknowledge that the sector is going through a huge and quite a painful transition. We will see more store closures, job losses and retail bankruptcies due to the inevitable shift as we spend more online – but it is not just online.”

Berg stressed there is a need to be realistic about the challenges facing the retail sector in general.

She crystallised these into a number of issues, beginning with the ‘Amazon effect’ [the colloquial supposition that Amazon’s disruptive influence in different markets is a major factor in companies’ fiscal losses – Ed].

“We hear a lot about the Amazon effect, but what about the Aldi or Primark effect?” She asked, moving on to suggest there is an oversupply of retail space in some areas, which is detrimental to companies in an ‘unforgiving’ climate.

As a result, the rise in supermarket and discount chains such as Aldi and Primark are ‘uprooting’ conventional approaches to retail. Those who do not adapt, are likely to be the ones most exposed, she added.

“The most important rule of retail is being relevant to your customers; if you can’t differentiate, stand out and offer what your customers want, those retailers don’t stand a chance,” she stated.

THE VALUE OF BRICKS & MORTAR

However, she moved to clarify that bricks and mortar as a concept isn’t going away anytime soon, with the role of the store evolving as opposed to ending.

This is no more evident than in Amazon’s case, which today operates around 100 stores and is largely profitable.

Since then, a number of ecommerce players have made the leap into the physical space with Alibaba and JD.com to name just a few.

There are others such as Asos that don’t have stores, but recognise the value of having a bricks and mortar presence, said Berg.

Repositioning retail for the 21st Century requires a seamless response to customer engagement, as the battle lines of competition are drawn in areas that blend physical and digital experiences.

She says the structural online advantages of being an online-only retailer are gone and having a physical space can help bolster activities such as collection, return and meeting fulfilment costs.

The store, as a billboard for the brand creates ‘a halo effect for ecommerce sales’, she said. “Future retail is online, future retail is blended,” she stated.

Stores are also ‘ripe for disruption’, with Amazon’s cash till-free zones an example of reducing customer friction but also stripping back checkouts and offering more real-time promotions.

Alluding to a quote from Amazon CEO Jeff Bezos, Berg said the firm in the past has made clear it would only open physical stores if it could do something different.

Now, it has opened event-driven pop-ups, lockers and the aforementioned checkout-free shops, alongside branded kiosks in US malls, although it has recently announced it will close these.

Berg suggests the example underpins the fact that while this particular bricks and mortar concept has not worked for the company, that is usually a sign of bigger and better things in the pipeline.

Amazon is in experimentation mode, Berg continued. “Amazon is a lot of things, it is a technology company first and a retailer second.

“But more than half of the stuff they sell they don’t own and over the next two years, most of their revenues will come from services and selling third-party goods.

A shop-in-shop in the non-Schengen Duty Free Iceland departures tax free shop at Keflavík International Airport combines an assortment of Icelanic liquor, cosmetics and other local goods.

“Increasingly Amazon is becoming the infrastructure – the rails that the retail sector runs on,” said Berg. “They have established trust with the consumer in a way virtually no other retailer has and they are translating that into other sectors.

“They are genuinely obsessed with their customers and have a relentless dissatisfaction with the status quo.”

HYBRIDISATION SPELLS OPPORTUNITY

Turning to the so-called ‘Amazon effect’, she acknowledges the company is dominating the US market, for example, where the firm accounts for 50% of ecommerce sales.

It already has a strong competitive advantage and its tax payment situation continues to be under scrutiny.

However, she argues they should also be considered a ‘force for good’, with cashier-less stores and digitally integrated shops offering real-time promotions.

Seating areas flanking the fashion precinct at Keflavík International underpins the airport’s approach to sense of place.  Operator Isavia hosted this year’s ACI commercial conference.

Taking the chore out shopping will be a big focus in the future, Berg concluded.

“In the future, we will see a greater divergence between functional shopping and fun shopping,” Berg said.

Rethinking the terminology of shopping can play a big part in this, she suggested, using Apple’s insistence on shops being called Apple retail ‘squares’ to tap into new consumer sentiment.

Lidl opened up in an Ikea store in Portugal; in the UK, Next has moved into Tesco and Oasis and Argos have moved into Sainsbury’s.

Ocado, Google and other technology companies are also benefitting from Amazon’s rise as retail becomes more frictionless and personalised.

Concluding, she said: “Retail isn’t dying; mediocre retail is. The future of retail is blended so we will continue to see an acceleration in the convergence of online and offline.

“There is a lot of doom and gloom and we need to brace ourselves for some more short term pain but I think for these retailers willing and able to evolve it is a fantastically exciting time.”

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