Solving major challenges confronting airlines and travel retail by implementing an Omnichannel business model
How can airlines use their E-Commerce websites to generate revenue? This question has been at the top of the list of stakeholders from aviation, F&B, Travel Retail as well as brands, airlines and airports for some time now – and not just since the Corona pandemic grounded virtually all air travel.
And, even though the number of passenger flights is picking up again, the challenges for the industry remain the same. Passenger buying behavior has fundamentally changed, as most purchases now are pre-planned. Customers expect convenience; speed; a consistent, enjoyable customer journey across all touchpoints as well as all of the options they have come to expect from global E-Commerce players such as Amazon.
Add to that the diminished impact of the traditional inflight retail model and topics such as reducing fuel burn and the necessity to lower the carbon footprint and it’s easy to see why airlines must rethink their fundamental business strategy. The new strategy is not about selling seats and everything that goes with it (baggage, car hire, hotels, etc.); airlines should reposition themselves as lifestyle companies, thereby expanding their value proposition to more than just these core products.
Here, airlines can benefit from the strong brand equity and trust they already have in the minds of customers. Simply put, having the right digital retail options could make a double-digit million-dollar difference in ancillary revenues. This approach is also a great way for airlines to grow their relevance and their engagement with customers.
The analog inflight retail model doesn’t work anymore – enter the digital opportunity
What airlines need to realize in this context is that they have a unique opportunity. The same passengers who ignore inflight offers are eager to travel further and more often with the airlines – and they absolutely love to shop, but the traditional model of products in a cart being pushed down the aircraft aisle is not exciting enough for them. A growing global audience that is keen to spend is a market scenario any retailer can only dream about – and represents the biggest opportunity ever seen in the history of inflight retail.
This opportunity can be realized through a new Omnichannel model, a digital solution designed around the modern customer’s needs. Everything the customer wants is placed on a single digital platform; from services such as parking, baggage, upgrades, food pre-order, car hire and hotels to luxury brands. Everything is optimized for easy discovery, and high engagement, with the aim of providing the customer with a seamless and personalized retail experience, right up to the point of instant payment and customized fulfillment options.
Omnichannel as key to a cohesive and comprehensive customer experience
This Omnichannel model that radically enhances the user experience and supports the creation of a stronger relationship across all points of contact is already being practice by handful of pioneering airlines, including Singapore Airlines, AirAsia and Lufthansa. These airlines are ahead of the curve and have taken inflight retail into the digital age.
With this broader, digital, view on ancillary revenue potential, Singapore Airlines, for example, has redesigned its traditional “KrisShop” offering into a powerful, new platform offering real-time, personalized content with customized sales and marketing campaigns. Instantly, the revenue opportunity is transformed into a prolonged window of opportunity for customer engagement, offering significantly enhanced convenience and experience overall.
Integrating a wide range of features and services, KrisShop engages passengers with a flexible, easily accessible port-of-entry to a personalized online shopping world via a powerful, reliable and scalable solution that supports all processes across the entire value chain in real time.
By refocusing away from retailing only during the inflight phase of a customer’s journey with them, Singapore Airlines has intelligently taken their customer relationships into many new promising domains. The expanded opportunities for contact and engagement with customers offer exciting new ancillary revenue opportunities for the airline, far beyond traditional inflight retail.
This traditional inflight retail model for creating ancillary revenue can neither meet the demands of today’s passengers, nor is it a suitable fit for today’s technology. Airlines need to rethink their business models to account for the dramatic changes in travel retail, customer buying behavior as well as to react to global crises such as the Corona pandemic. At the same time, airlines can take advantage of the flexibility and scalability of digital platforms. Only by implementing Omnichannel solutions will airlines be able to offer their passengers the convenience and touchpoints they have become used to from global E-Commerce players. Key issues for them to consider when developing new business models and digital platforms are personalization, premiumization, planned purchasing, potential of the brand and the power of data.
Three key recommendations
- Airlines and travel retail stakeholders must rethink their fundamental business strategies, evolving from transportation providers to lifestyle enablers.
- Having strong multiple revenue streams based on digital, Omnichannel business models could make a double-digit million-dollar difference in the decline in ancillary revenues.
- Industry stakeholders need to create a consistent customer experience throughout the passenger journey.