A Guide on Travel Retail: Definition, Growth Factors, and Future Prospects
Travel retail industry is one of the major subsidiary yet standalone industries of the travel and tourism sector. Since the last few years, barring the pandemic period, this industry has seen a substantial rise in terms of its growth number. Though one of the obvious reasons behind the growth in travel retail industry is the growth in number of travelers, there are certain growth factors which are characteristic to the travel retail industry itself.
In the 1700s, there was a shift from primary economic activities like agriculture, mining, etc. to secondary sector constituting manufacturing, construction, etc. This shift was primarily facilitated by the Industrial Revolution which was kickstarted in the Great Britain. Consequently, on similar lines, the ICT revolution enabled a shift from secondary to tertiary sector which predominantly constituted of service-oriented economic activities. One of the biggest industries that emerged out of the tertiary sector was the travel and tourism industry.
What is Travel Retail and Why is it on the Rise Since the Last Few Years?
In the last few decades, especially after the opening of majority of the global economies post-1991, travel and tourism industry has grown like anything else. Some economists even consider it to be a separate economic sector altogether. On account of this growth, several subsidiary and standalone industries have propped up and thrived under the travel and tourism sector. One such standalone industry is the global travel retail industry. Travel retail pertains to creating, planning, and providing travel services, while at the same time, engaging in sales activities to cater to the shoppers’ demands while they are in transit.
The growth in the travel retail market is mainly attributed to four main factors which are discussed below:
- Boom in the Travel Industry on the Whole
Except the aberration witnessed in the last two years due to the Covid-19 pandemic, there has been a steady growth in the number of people travelling across the globe. Though the reasons for travel might be different for each individual, the travel retail industry has been able to fulfill their varied demands efficiently. Hence, a growth in the travel industry has been mirrored by the travel retail industry. Also, since people have been exploring countries and places that were previously not so often visited, the travel retail industry has found new ways and avenues to offer their services.
- Travelers Tend to Shop More
Studies by various behavioral economists have shown that travelers, especially the ones going out for vacations, tend to shop more. This shift from a thrift behavior, according to these experts, is due to the leisurely atmosphere and stress-free state of mind. Also, since travelers have a lot of free time at their disposal, they can shop for longer periods of time. Another interesting theory as to why people spend more at transit channels, such as airports, is that the infrastructure inside airports is built on the concept of open-plan setups. As a result, luxury shopping and casual shopping spaces are intertwined in each other, thus blurring the lines between the two.
- Accurate Data Insights
The retailers engaging in travel retail and sales activities have an added advantage of accurate information about their customers. Their travel and departure times, the type of aircrafts they are travelling, their destination, etc. helps the retailer in getting a brief idea as to what the traveler might be looking for. This helps these retailers to plan their sale strategy accordingly, which helps in maximizing their profits. Also, providing customer service to the passengers or people in transit becomes much easier due to these vital data points.
- Better Showcasing of Products
Since travelers tend to shop more products and spend more on luxury items during their travel, they tend to appreciate certain products more than in normal circumstances. This provides the companies and travel retailers to showcase their products and test whether the products are sellable. Hence, various international brands of different sectors tend to launch and market their unique products through the travel retail industry.
Future of Travel Retail Industry
Though the Covid-19 pandemic and the subsequent lockdowns put a strain on the travel and the travel retail industries, market analysts are confident that both these industries will register huge growth rates in the post-pandemic world. Also, digitization of financial services has improved the quality of shopping experience at the transit channels and has helped in reducing the complexities associated with foreign currency exchange. Moreover, the introduction of smart technologies has further improved data collection, which has helped travel retailers to improve their business strategies in a much better way. All these factors point toward a great future of the global retail travel industry.
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