Sunday, July 08, 2007

Airport Shop Economics

Stroll through Zurich Airport and you’ll notice that, as in many airports these days, a vast amount of high-class shopping awaits past security: Burberry, Chopard, Hermès, Armani, Gucci, Hugo Boss – they’re all there. If you want to spend $600 on a purse while waiting for your flight, you can.

The only things I’ve ever bought at airport shops are newspapers, magazines, food, drinks, coffee, and power plug adapters that I forgot to bring. I’ve seldom set my foot in one of the boutiques, much less bought something there. Almost everyone I know hasn’t either.

Consequently, it seems like a large percentage of airport floor space is wasted on shops that people don’t visit or buy goods from. Why are they still there?

Boutiques, in airports, as in downtown shopping areas, are high-margin, low-frequency businesses. Sure, they may not have as many visitors, but when someone buys that $600 purse, they’ve just paid for the entire morning’s rent and salary. The road to success is to charge a lot of money to a few people.

The reason why boutiques are omnipresent at airports is that they are especially well-frequented by people with lots of disposable income and a knack for lifestyle: The rich, the jeunesse dorée, executives, middle managers, consultants – these are people who can make that $600 impulse buy. For the other 80% of travelers, this floor space is wasted.

But there’s another reason for their presence: Airport managers love boutique shops. They pay the same rent as anyone else, but make the whole airport seem more upscale. The shops themselves are often beautifully designed and pleasing to the eyes of all travelers. Even if they never come inside.


Christian said...

dear gabor, you might consider taking into account that a shop in a well-frequented airport also contributes to the brand and image. i believe that the advertising part of such a store is much more important than the actual sale. these luxury brands do not make their money with the rich people only. maybe the selection of your shopping friends is not representative ;-)

Gabor said...

I think that each of these shops are actually profitable on their own. It's not just a marketing expense.

I'm not actually sure about the airport shopping behavior of my friends. So far, I have only negative evidence.