Footfall may be higher than before the pandemic, but conversion rates and spend are still coming up short. TRBusiness takes a look at the latest tobacco category insights from m1nd-set and the factors driving the recovery.
All those with a stake in the tobacco category will be eager to drill down into the dynamics at play over the past few years that have shaped the current trading environment.
Swiss research agency m1nd-set has revealed an illuminating report that tracks the tobacco category from the years leading up to the pandemic (2017 to Q1 2020) to recent times (2021, H1 2022 and Q3 2022).
Its research, titled TR Shopping Trends Duty Free Tobacco (Q3 2022), provides compelling insights into the category’s evolution.
It notes how, after a peak in 2021, footfall has been gradually decreasing. Yet, it remains higher than before the pandemic.
Delve a bit deeper, however, and we can see that while stores may be busier, conversion rates and the amount that passengers are spending are still recovering.
“While travellers are more likely to visit the duty free store for tobacco (9% out of total pax in Q3 2022 versus 6% in 2017-Q1 2020), the conversion rate is much smaller than it used to be (50% compared with 72%) despite slowly recovering compared to other post-covid periods,” said Anna Marchesini, Head of Business Development, m1nd-set.
“Nevertheless, the purchase rate (percentage of duty free buyers out of total passengers) has remained stable through these difficult times.
“After a big decrease in H1 2022, the amount spent increased in Q3 2022 (to US$50 compared to US$37 in H1 2022) while still remaining below pre-Covid levels (US$59 in 2017-Q1 2020).”
The study, which pinpoints the predominant trends in consumer behaviour among a sample of more than 120,000 international travel retail shoppers, zooms in on everything from the factors influencing visits to buyer demographics, purchase drivers, plus much more.
“While travellers are more likely to visit the duty free store for tobacco, the conversion rate is much smaller than it used to be.” Anna Marchesini, Head of Business Development, m1nd-set
Key takeouts include how the appearance of the store can make or break a visit, with 31% of travellers mostly heading to the tobacco section because they find the shop attractive.
“Around a quarter also enter this section to benefit from a price advantage, by habit, or simply to browse around,” said Marchesini.
All the other top drivers of tobacco visits, from hunting down exclusives to seeking a self-treat, are ‘significantly’ impacting more on travellers in Q3 2022 than in the 2017-2020 period, aside from the price advantage, which has severely lost its importance (26% versus 58% in 2017-2020).
The study cites ‘killing time’ and ‘benefitting from attractive promotions’ as the top reasons why tobacco buyers find the duty free channel appealing.
“In line with the appeal factors, the top drivers to purchase are good value for money, price advantage and convenience,” confirmed Marchesini.
“Nevertheless, most purchase drivers have significantly less impact on travellers’ purchase decision than prior to the pandemic.
“A clear majority of tobacco shoppers purchase for their personal consumption,” she went on to describe. “While gifting was a common purpose pre-covid, its importance is now significantly smaller. In contrast, buying with a sharing purpose is much more frequent.”
The research also shows that half of tobacco purchases are made by undecided shoppers and that impulse purchases have more than tripled compared with pre-covid.
Notably, around half of tobacco shoppers purchase a product on promotion or that is exclusive to the duty free channel. This is something that has become significantly more popular since 2021, says the research.
However, after a peak in 2021, the proportion of first-time tobacco buyers is back to its pre-covid levels.
Marchesini explained: “Around half of tobacco shoppers interact with the sales staff, among which two out of three are impacted in their final purchase decision.
“Once again, this shows the crucial importance of in-store experience and the necessity of having knowledgeable and qualified store personnel. Most of the tobacco visitors that leave the store empty handed do so due to a lack of motivating promotions or sales.
She added: “Not having enough time to choose and not being offered duty free exclusive products are also barriers to one out of four visitors or more; their importance is significantly stronger than it was in pre-covid times.”
Stay close to TRBusiness.com for more consumer insights from m1nd-set.