Airport retailing has been a lucrative option for several industries following the advent of globalisation in the early 1990s. Speaking specifically of the airport retailing consumer electronics market, the information technology boom and industrial revolution 4.0 have been key enablers. As a result, consumer electronics have significantly changed the landscape of airport retailing. Airport retailing consumer electronic stores are now at par with traditional airport retail stores, where alcoholic beverages and tobacco sales dominate, and food & beverage outlets.
Several factors have been responsible for strengthening profile of the airport retailing consumer electronics market. At the same time, some recent developments are also having a profound impact on the consumer electronics market in general and the airport retailing consumer electronics market in particular. When seen in an integrated manner, these developments have the ability to provide a bigger push to the airport retailing consumer electronics market in the coming years.
Impact of COVID-19
A scant few industries and markets have been able to escape the impact of the COVID-19 pandemic and airport retailing consumer electronics is no exception. Before the outbreak of the pandemic, the airport retailing consumer electronics market was estimated to grow at a healthy CAGR of approximately 6-6.5 percent. However, the post pandemic scenario presents a different picture and most market growth estimations have been recalibrated to a more measured CAGR of 3.5-4 percent. However, these numbers alone fail to give a clear picture of the scenario.
The trend of decreasing growth in the airport retailing consumer electronics market has more to do with the interruptions in air travel and closure of airports than with actual demand for consumer electronics. To put this in perspective, consider that the overall travel retail market saw a steep decline of approximately 55 percent in 2020 (when it was valued at USD 33.43 billion) as compared to 2019 (when it was valued at USD 74. 31 billion); furthermore, the airport retail segment accounts for over half of the global travel retail market.
On the other hand, the pandemic has encouraged digitisation and adoption of technology, which in turn has increased the demand for consumer electronics. As a result of the pandemic, the consumer electronic goods market is expected to grow at a CAGR of above 7 percent in the coming years. This growth in demand is observed on both quantitative and qualitative fronts; i.e. in terms of both number of products and better features and specifications of consumer goods.
When these factors are taken in combination the predictions of a CAGR of 3.5-4 percent for the airport retailing consumer electronics market is only temporary. In the long run, airport retailing consumer electronics vendors can look forward to increased air travel and airport activity amid a persisting high demand for consumer electronics. This presents a conducive scenario for strong growth in the airport retailing consumer electronics market. Furthermore, airport retailing consumer electronics stores can also leverage a few inherent advantages to aid this growth.
Factors conducive for airport retailing consumer electronics
Airport retailing consumer goods have traditionally benefited from exemptions on custom duties. This holds true for airport retailing consumer electronics as well. This has been the single largest factor affecting airport retailing consumer electronics business models in previous years. However, as time has passed certain other nuances of the market have also come to the fore.
The most prominent among them has to do with operational hours. Airport retailing consumer electronics stores operate for substantially longer than their non-airport counterparts; in some cases, their operational hours extend to almost 12-14 hours more than retail consumer electronics stores outside airports. This translates to a higher footfall of customers. Furthermore, the high waiting times at airports also means that customers have more time to shop and view products. Thus, airport retailing consumer electronics vendors also benefit from higher instances of leisure shopping.
Another key trend observed by the market is that the airport retailing consumer electronic accessories segment has a substantially higher value in terms of percentage than the non-airport retail consumer electronics accessories segment. This has been explained since consumers often purchase electronic accessories such as headphones or chargers from airport retailing consumer electronic stores on an emergency basis while travelling.
Thus, when the factors of custom duty relaxations on consumers, longer operational hours resulting in higher footfalls and the higher demand for consumer electronics accessories are taken together, airport retailing consumer electronics vendors hold a significant edge over their competitors.
The Post-COVID Scenario
The recovery of the hard-hit aviation sector is expected to be slow and certain estimates suggest that a complete recovery to post-pandemic levels may take as long as a decade. However, with mass immunisation programmes gaining steam in several countries, economic activity is likely to reach pre-pandemic level sooner than earlier expected. The impact of this resumption in economic activity is likely to hasten the aviation sector’s recovery as well. This expectation of a rapid recovery augurs well for the airport retailing consumer electronics market.
Furthermore, certain air traffic hubs, most notably in the United Arab Emirates, have been attempting to position themselves as lucrative post-pandemic destinations; airlines from the UAE are also reportedly mulling the concept of COVID-19 immunisation passports. The nature of these countries as key transit hubs has led to a strong base of established airport retailing consumer electronics vendors in major airports in these countries. Furthermore, the aviation sector, despite its current beleaguered status, is also growing in importance in developing economies in South and South East Asia, which makes these segments a key growth area for the airport retailing consumer electronics market.
Most industry growth prediction models since the outbreak of the COVID-19 pandemic have assumed that the airport retailing consumer electronic market will follow the aviation sector’s growth trajectory over the coming decade. While the dependency is undeniable, the direct correlation drawn is erroneous. Given the higher demand for airport retailing consumer electronic devices and accessories, coupled with the other factors outlined above, a linear growth trajectory of the aviation sector in the coming years is likely to lead to geometric growth trajectory for the airport retailing consumer electronic market. Thus, it should come as no surprise if this market makes a much stronger than expected comeback in the coming years.