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Footwear Firms Up the Ante on Airport Stores

LOS ANGELES — When airport retail started to take off a few years ago, brands viewed the stores as a way to snatch a few extra bucks from travelers with time to kill.

Now, though, it’s a soaring business.

Airport retail generated $34 billion in sales in 2007, up from $29 billion in 2006. Luxury goods accounted for 35.5 percent of those sales, a 16.6 percent increase over 2006, according to research service Generation Databank. That’s why Bally, Prada, Ferragamo and Chloé, among others, are all going along for the ride.

“Airport retail is growing very quickly, and the image is also changing,” said Marco Franchini, CEO of Bally, which will have 48 airport outlets in locations ranging from Shanghai to Amsterdam by the end of the year. “The market is shifting from a main category, like tobacco, alcohol and cosmetics, to a more brand-oriented shopping experience, with full boutiques and personalized shop-in-shop corners.”

To cash in, brands are funneling a chunk of their money into airports overseas. Splashy new terminals opened earlier this year in London and Beijing.

“Airports are a wonderful place for retail,” said Neil Clifford, CEO of Kurt Geiger, which has six airport shops in the U.K. and in March bowed a Kurt Geiger boutique in Heathrow’s Terminal 5, joining such neighbors as Prada, with its first airport store, and Christian Dior. “You’ve got money, you’re going on holiday and you have time to spare. You can buy an iPod or a Montblanc pen or a Hugo Boss shirt.”

Or a pair of shoes. “We play with the traffic, play with the mix from morning to evening depending on the [flight] destination,” said Clifford, of the various styles offered. “If there’s a Far Eastern flight in the morning, we put the higher end out front. If it’s European or domestic in the evening, we may have more high fashion and fast fashion, more women’s.” Handbags represent about 25 to 30 percent of the selection, with brands such as Marc Jacobs, Tory Burch and Vivienne Westwood.

Still, a few signs suggest that airport retail could lose altitude. Increased oil prices are making airline tickets more expensive, while the uptick in food and gas prices gives consumers pause before spending on pricey vacations.

But experts say people will still travel, even though they might fly less.

The question for airport retailers, then, is whether to chase the upscale, “commercially important passengers” — as airlines label them — or try to squeeze an extra dollar or two out of the ordinary traveler. So far, luxury names are betting that the world population of high-spending travelers will increase. It’s just a matter of figuring out which countries they’ll be flying to and from.

High Road to China

One growing travel area is China. In February, Beijing Capital International opened the world’s largest airport terminal, Terminal 3, partly in preparation for this month’s Olympic Games.

Meanwhile, Hong Kong International Airport reported 20 percent retail sales growth in the first four months of 2008, and a 25 percent growth for luxury retail. It is currently soliciting offers from tenants for the planned East Hall Luxury Brand Boutique Boulevard.

In 2007 in China, international passenger traffic was up by 17 percent, to 38.3 million passengers. But domestic Chinese air travel dwarfs that, at 349 million. And that group, though not as free-spending as the international travelers, has plenty of appeal, too. What’s more, the wealth of China’s middle class is among the world’s fastest growing.

“[Beijing Terminal 3 has] the most luxurious domestic mix that I’ve seen anywhere in the world, with brands such as Omega, which is not normal in the domestic market,” said Robbie Gill, an architect and a director of The Design Solution, a London firm that plans and designs airport retail. “The Chinese are a massive market. Those brands have to work hard to be the preferred brand. They’re using shops in domestic terminals as 3-D advertisements.”

Bally has spots in Beijing’s international and domestic terminals. “Our airport locations act as virtual ‘ambassadors’ for the brand,” Franchini said. “Our strategy is to open boutiques. In the case where the airport shopping area doesn’t allow full-size boutiques, we ask for a personalized shop-in-shop or a corner.”

Laurence Franklin, CEO of the Tumi luggage, handbag and accessory chain, agreed that individual shops are a goal. Of Tumi’s more than 120 points of sale in airports worldwide, about 20 are standalone or side-by-side stores. “Our strategy is to expand our airport presence aggressively, but with an emphasis on quality — meaning fully branded, standalone stores — versus quantity,” he said. “Airport development is central not just to our global retail strategy but is a significant part of our overall brand strategy for the next several years.”

Passage to India

For many brands, India is at the top of the wish list, partly because its elite consumers are used to shopping in airports. “India’s own domestic middle class has been growing at a phenomenal rate, but the quality and amount of retail downtown never caught up,” Gill said. “Indians had to travel to buy it.”

So now the market is coming to India. Gill’s firm is preparing retail plans for three new terminals in the Delhi and Mumbai airports, one opening in December and the others in 2010. “There will be a large luxury component,” he said.

A change in airport ownership is also boosting commerce in India, Gill said. “Private entities bought both airports, so the whole face of Indian airport travel will be transformed.” But he doesn’t want to transform it into a luxury paradise. “We’ll have a design area dedicated to craft, with Indian retailers. It will be different from what you see in the rest of the world. You’ll see the richness of a culture through its retailers,” he explained. “[The luxury concentration] is not a problem for sales, but it might be in the future because if you replicate the same names worldwide, there’s no sense of difference.

“Not everybody can afford to walk into Gucci and drop $2,000 on a handbag,” Gill continued. “Seventy-five percent of the people who visit airports only buy a newspaper and a cup of coffee.”

Other up-and-coming airport retail countries include Russia, where the ARI management firm won the retail contract for Terminal 3, opening in October at Moscow’s Sheremetyevo Airport.

At Singapore’s Changi Airport, Chloé opened its first store within that country in May 2007, choosing the airport over a city location. Gill’s firm designed Changi’s Valiram luxury island, which houses shops for Bottega Veneta, Fendi, Cartier and Bulgari.

Charles de Gaulle’s T2E terminal opened in March in Paris with the first Yves Saint Laurent airport store.

In England, Clifford is enthusiastic about the new store at Heathrow. “We’ve been pleasantly surprised,” he said. “We’re seeing relatively single-digit growth — not 10 to 20 percent — but T5 represents a new store and a new business for us. London is a pretty cool international destination. We’re benefiting from that.”

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