Duty-free shopping was the brainchild of Irish businessman Brendan O’Regan, who worked at the country’s then struggling Shannon Airport during the late 1940s as a catering comptroller.
Whilst travelling back to Ireland from a transoceanic trip to the US, O’Regan took inspiration from an on-board shop that was selling duty-free goods and saw an opportunity. Four years later, the first duty-free shop in the world opened at Shannon Airport to sell whiskey for $1.50 per bottle, and the concept was soon replicated in many other European and international hubs.
The rest is history. In the space of less than a century, O’Regan’s concept moved from being a local initiative to becoming a $70bn business welcoming tourists in almost all airports around the world.
“Duty-free today bears little resemblance to its original iteration,” comments Sarah Branquinho, president of the Duty Free World Council, a global association representing the duty-free and travel retail industry.
“Initially, our industry was based on retailing a limited number of highly taxed product categories, whereas today the offer is far more extensive.”
At the core of duty-free shops’ initial strategy was also selling products that were not yet available on the high street, though this model later changed as high street offerings grew substantially in the following decades.
IS DUTY-FREE ACTUALLY CONVENIENT FOR PASSENGERS?
“The convenient aspect of is that if you’re going on holiday and need a specific product, it’s easier and quicker to buy it at the airport than on the high street.”
HOW IS DUTY-FREE CHANGING TO MEET EMERGING TRENDS?
Irrespective of its overall value for money, airport duty-free remains highly successful among consumers. According to the World Duty Free Council, global duty-free retail sales in 2017 were estimated to reach $75.7bn and the overall industry has been growing at a compound annual growth rate of more than 8% since 2000. This makes it the second-fastest-growing global sales channel after online.
Over the years, rocketing passenger rates, increased business opportunities and a change in the air travel lifestyle driven by the rise of budget airlines have further allowed it to evolve. As Hinton explains, airport shops now largely resemble a shopping centre, disposing of a much wider offer that has shifted from luxury to mass-market products.
“With airport retail, you’ve got a captive audience, especially with waiting times being much longer now,” she says.
“This is great for retailers because they have a captive audience that is constantly changing, whereas on the high street, the footfall can be very intermittent, and numbers are going down.”
In the ages of smartphones, these shops are also embracing technological changes, with many now offering Alipay payments – as the number of Chinese customers ramps up – as well as mobile loyalty points to use in loco.
“Operators are also introducing online orders that you can then pick up in-store at the airport,” says Hinton.
“Another recent trend is that duty-free used to be when you were arriving at an airport, but now we are beginning to see more of it on departure.”
SUSTAINABILITY AND COMPETITION THREATEN INDUSTRY SUCCESS
“This, in turn, means greater retailer pressure on the brands and risks making the channel less attractive over time.”
“It’s all about the products and the experience you have with them,” explains Hinton. “And AR gives the opportunity to experience a product in a different environment.”