Australian airports are proving to be a lucrative space for retailers searching for high-turnover locations. After all, you're tapping into a captive audience wanting to alleviate the boredom while waiting for their flight. But as Nina Lees discovers, only a selective few are able to get their foot in the door.
If you've travelled anywhere on a plane in the past year or two, you'll notice the growing number of retailers taking up residency in Australian airports. Sydney, Melbourne, Adelaide and Perth are among those airports to have; or which continue to; undergo significant development to their retail space.
One of the biggest airport retail developments is being undertaken in Sydney, which has committed more than $500 million in an expansion and redevelopment project of its international terminal. Once complete, it will rival some of the best shopping experiences within an airport anywhere in the world.
The redevelopment, which is due for completion in April 2010, will enable shoppers to wander between a mammoth 110 retailers after developers undertook an exhaustive search to find the right mix of international and Australian brands. The overseas brands to have signed a lease include Emporio Armani, Burberry, Ralph Lauren, Fendi, Bally and Coach; which will retail beside well-known Australian labels like RM Williams, Rodd & Gunn and iconic surf and sportswear brand Billabong. All will be located in the new retail area to be called The Forum.
And international top-end brands are showing increasing interest in securing retail space within Australian airports, with Emporio Amarni's foray into Sydney airport later this year to be its first - but not necessarily the last.
And it's not surprisingly when you look at the turnover generated in airports. Incredibly, Sydney Airport is the most profitable retail asset (per square metre) in Australia, raking in double the annual turnover per square metre of some of the country's largest shopping centres.
Sydney Airport CEO Russell Balding said the upgrade followed feedback from travellers who said they wanted more retail opportunities. He said a breakdown of shoppers reveals that the majority of airport shoppers are aged between 21 and 35 years of age. "Customers spend an average of two hours dwell time at T1, which presents us with a unique opportunity to capture the attention and imagination of this captive audience," Balding says.
And while it might be on a somewhat smaller scale, it's a similar story in other parts of the country. Adelaide Airport, for example, has undergone significant redevelopment in recent years, growing its retail space considerably.
The airport's general manager of corporate affairs, John McArdle, says the opening of the new T1 terminal saw the number of retail and dining outlets increase from 11 to more than 25. And there could be more to come. "Adelaide Airport has plans to expand the terminal to cater for increased airline traffic; and further expansion of retail space would be considered as part of this planning," McArdle says.
On the other side of the country, the Perth Airport is now home to not one, but two Rip Curl concept stores; the first of their kind in Western Australia. And just two months ago, Sunglasses Hat opened its doors in Perth Airport as part of the mammoth $1 billion redevelopment.
Not surprisingly, airport retail developments are proving to be phenomenally big business, with Sydney Airport's 2008 financial report revealing the retail arm of the business out-performed passenger growth, with a 10.1% increase in revenue to $192 million. And those figures will keep growing, with 32 million domestic and internationally passengers passing through the airport each year. In fact, international visitation alone is predicted to grow by 400,000 passengers each year for the next 16 years.
For leading luxury good retailer Coach, part of the Valiram Group, securing space within the Sydney Airport will no doubt reap lucrative rewards. Established in 1941 in New York, the Coach label produces luxury leatherware goods including handbags, business cases and luggage and travel accessories, wallets, eyewear, gloves, scarves, fragrance and jewellery.
Ashvin Valiram, director of the Valiram Group, says securing a boutique within the Sydney Airport was extremely exciting. "[We] had been quietly for the right opportunity to launch our next store in Australia. Sydney Airport was the obvious choice given ... its status as the gateway to Australia."
But securing a retail outlet in an airport can be extremely difficult, with an airport lease arrangement extremely hard to come by. And they're out of reach for discount fashion retailers, with authorities able to be particularly fussy about which brands they allow in. Not surprisingly, this is mainly due to the dollar. Rents are not charged to those retailers operating at Melbourne Airport, at least; with payments in lieu of rent instead based on a percentage of sales derived from the operator. And if you're not turning travellers on; you're out, with payments underpinned by a guaranteed minimum. This means that unlike some retail arrangements, the shopping centre model of revenue per square metre does not apply.
And while it's hard to get into an airport, there does appear to be a window of opportunity in Perth, with the airport's general manager, Scott Norris, revealing the refurbishment program was continuing.
We'll be seeking expressions of interest from organisations for retail opportunities to further expand the range of retail options for passengers," he says.
But thousands of retailers who don't fit the criteria of the ideal airport tenant are finding ways to overcome this hurdle, with a number of retail developments within a short walk of major airports springing up around the country in recent years.
Harbour Town was one such development that's piggy-backing the lucrative nature of airports, opening its doors on the western boundary of the Adelaide airport in 2003.
Retailers in the southern city of Hobart have also banded together in a bid to snare some tourism expenditure, with a $100 million; 71,000 m2 retail outlet built over an area approximately equal to nine football fields within a stone's throw of the airport. The site is home to a Direct Factory Outlet that's home to more than 100 fashion brands alone.
It's a similar story at the Brisbane Airport, where a major retail development called The Village Markets commenced in 2002 within minutes from the airport.
However, as with all retailing, there are down sides. Predicably, retail sales within airport locations are subject to the number of travellers. And it can take months; or even years; to recover when things get tough.
The events of September 11, 2001 saw many fearful tourists give up airline travel for a period, which dealt a crushing blow to some retailers forced into discount mode just to stay afloat.
The current economic downturn have also had an impact on airline travel has again affected airport retailers - potentially even more so than those retailers in a more traditional mall environment, which can still, at least, rely on passing traffic.
But the good news is the Australian airlines are slashing airline tickets to nominal fees in the wake of the economic crisis, which has kept a steady, albeit smaller, number of people in Australian airports.
The top end brands taking up residency in Australian airports will no doubt always enjoy strong sales, with travellers often intent on rewarding themselves with some retail therapy before boarding a plane.
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