A recent report from global management consulting firm Kearney suggests price competitiveness in travel retail is eroding. While traditionally, value has been a key purchase driver, the report claims that negative price perceptions among travellers is as high as 60% in categories such as gifts, electronics and fashion and accessories compared to domestic and online retail.
TRBusiness asked a tranche of travel retail suppliers for their observations on the value proposition within the travel essentials and electronics categories.
It would be fair to say that inflationary forces exerted on the wallets of today’s consumers means price is certainly a consideration when browsing or purchasing.
According to recent research* conducted by Kearney for Tax Free World Association (TFWA), this applies particularly to heavily taxed categories such as tobacco and wines & spirits. But what about the travel accessories and electronics segments?
Hoj Parmar, CEO of B-Corp certified tech brand Bitmore, points out that the electronics sector is marked out by intense competition, with intricate dynamics influencing pricing strategies.
China competitively positioned
“Different margin expectations exist across various retail channels, encompassing high street stores, online marketplaces, direct-to-consumer (D2C) sales, and travel retail, all of which significantly impact pricing and consumer perceptions,” he told TRBusiness.
“From Bitmore’s standpoint, within our travel retail landscape, we believe that our product proposition stands as a competitive option. We take pride in offering high quality, sustainable products at an affordable price, and this sentiment aligns with the feedback we consistently receive from our retail partners.”
Importantly, there are geographical and cultural variances when it comes to price perceptions, something consistent with the Kearney report findings.
“For example, if we take China, custom policies require that duty free products be priced at least 20% lower than taxed products,” noted Allen Fang, Travel Retail Manager at Swedish beauty tech firm Foreo.
“Therefore, except on some large national-scale online promotion days, duty free price competitiveness remains very advantageous in China.”
With consumers craving experience-led retail moments, the gauntlet has been thrown down to those value brands where margins are perhaps thinner on the ground. On the other hand, those that play in the premium retailing playground are used to ensuring their messaging to consumers is on-point to justify higher priced propositions.
“We consider our product to lean more on the premium side, so the Cabeau brand has been a driver of demonstrating to our customers that even though you may have to spend a few extra dollars at purchase, the rest and seated sleep you will enjoy could be considered priceless,” noted David Sternlight, CEO of travel neck pillow specialist Cabeau.
“We feel we are able to back up any negativity regarding the pricing when a traveller is able to relax and sleep while using our travel accessories.”
For some, the answer to the question of whether positive pricing perceptions in DF&TR are dwindling is a more straight forward one.
“The trend that we see in travel retail is that customers want to spend their money on good quality, well known and trusted brands,” commented Daniel Levin, Group Managing Director of Travel Blue.
“As a well-known travel retail brand, with a global warranty for all our products, we have not felt this kind of feedback or trend.”
According to the Kearney report, consumers cited duty free pain points in electronics such as higher prices versus at home (23%) and a lack of the right product (28%) as deterrents to spending.
For more commentary and to read the full article, see the TRBusiness November/December e-zine by clicking here.
* Kearney study involved 3,500 customers across 10 countries plus in-depth interviews with more than 40 senior executives from global airports, airlines, travel retailers and brands. Among the findings, 50% of traveller respondents perceive duty free prices as less competitive than domestic and online retail, while 20-40% reporting dissatisfaction with assortment.
TRBusiness co-moderated an electronics and travel accessories webinar last month that was broadcast on the TFWA 365 platform.
The discussion went beyond pricing dynamics to consider merchandise ranging, the challenges of space/inventory management, rent structures and investment and innovation to an exploration of purchasing behaviours and identifying new conversion opportunities.
Those who wish to view the webinar in full can do so by clicking here.