July 25, 2024

Hey big spender

Stuart Forster takes a look at onboard retail to understand evolving trends relating to sales and opportunities to boost ancillary revenue  

In terms of generating ancillary revenue for airlines, income from onboard retail is currently second only to takings generated from payments for transporting luggage. So how can airlines further leverage their retail offering to a greater advantage?

How products are offered and sold aboard airlines has altered relatively little over the past half-century. Trolleys are now lighter than they were a few years ago but how crew members interact with passengers during flights remains fundamentally unchanged.

Short-haul flights present only limited opportunities for crew members to dedicate their attention to making sales. And the space available for products to sell has not expanded.

In recent years, passengers have become accustomed to airlines’ move away from offering complimentary food and drinks on domestic routes and the adoption of buy onboard (BoB) models. Hybrid models, offering items for sale to complement those that are distributed also exist.

Rising catering and associated delivery costs mean that the provision of inflight meals can represent a significant proportion of the ticket price on some routes.

Giving passengers the option to buy quality products can be a shrewd business move, saving money while generating income and, when done well, enhancing satisfaction levels that may lead to a competitive advantage.

“Thanks to new technology, we are on the verge of change,” predicts Aleksejs Romanovs, Key Account Manager at LSG Sky Chefs.

Some things look unlikely to change over the next few years. “Space will remain an issue. Time in the aircraft will be the most decisive thing and passengers will expect to buy onboard on domestic airlines,” says Romanovs, a co-organiser of the AmberSky onboard retail and ancillary revenue conference, whose 2025 edition is planned for February 18-20 in Riga, Latvia.

Data crunch

“The assortment of products available aboard airlines must be data-driven. Innovative assortments may sound like a great idea but the spend per head drops if an airline does not understand what passengers really want,” continues Romanovs, who suggests keeping best-sellers and changing 20-30% of products when menus and catalogues are refreshed.

With limited space available on trolleys, he warns that products that do not sell well represent “double damage” as they are failing to bring in revenue while taking room that could be occupied by products that people would buy.

“Presently, this is an area for improvement. Analysis needs to be undertaken relating to what is sold and what can be sold on routes,” adds Romanovs and continues: “Onboard retail is the same as any other business: you understand your customer, you understand your position and then you take it from there. Every airline has its niche passenger.”

At the same time, the tastes, expectations and spending behaviours of passengers inevitably vary by route. This makes it tricky to optimise product selections across entire fleets with a uniform loading model. Additionally, seasonal changes to flight schedules mean that the window of opportunity to get selections right is relatively narrow.

Yet not everything available should be a best seller as it’s good to have variety to encourage people to browse menus and catalogues too.

Utilising digital offerings

For many air passengers in Europe, picking up a product catalogue – typically available in the seatback pocket – and browsing is part of the ritual of flying. However, it’s not as common on domestic flights in North America and in parts of the world where non-food items rarely feature.

Passengers on European flights with no intention of buying will browse the pages and, in some cases, be swayed to make a spontaneous purchase. Increasingly, those catalogues can be accessed by scanning a QR code or via the inflight entertainment system.

Personalisation is becoming an increasingly prevalent aspect of the inflight experience. Loyalty programmes can be leveraged for information about passenger preferences and their purchase history. Technological advances mean that it will become possible to push tailored offers to passengers browsing digital catalogues, with the aim of boosting both ancillary revenue and customer satisfaction.

Despite the rising utilisation of technology, the human element in closing sales remains as important as ever. That includes having an engaged and engaging crew whose members are trained in sales techniques and motivated to close transactions – including through commissions which boost remuneration.

The onboard connectivity that provides passengers with internet access also makes real-time payments possible, cutting airlines’ exposure to fraudulent transactions that can run into a double-digit percentage of takings with offline payments.  

Water supply

Sales history shows that giving away water during flights hits the overall spend per passenger (SPP) by up to 40%. Takings from tea and coffee sales drop by up to 60% when water is provided free of charge. Distributing any snack to passengers detrimentally impacts opportunities for sales. So is it time for airlines to stop doing that?

As access to the internet becomes the norm during flights, passenger behaviour is likely to change. Even with engaging product catalogues, time in the air could be used to seek out deals for similar products online or simply to browse social media, answer emails or undertake other work while travelling.

Exclusive items

This makes it all the more important for airlines to offer products that are available exclusively while travelling. Travel-exclusive products represent a growing proportion of sales made during flights. They are possible because of people who know the business and companies who know manufacturers and processes, enabling costs to be minimised.

Fragrances are the leading category of product in onboard sales in Europe. Perfumes from renowned brands tend to sell well, often because travellers feel compelled to take home gifts. Collectable items, such as aircraft models, can prove successful onboard too.

It is a cost-driven environment and brands need specialist teams to interact with the inflight industry. This explains why some have decided that being onboard isn’t in their best interests.

“Consumer behaviour changes in the air. We know that the pressurised, dry environment affects people’s perceptions of flavours. This is a factor as to why tomato juice is way more popular during flights than on the ground. Among snack bars, Twix tends to outsell Snickers. And people make impulsive purchases, meaning items such as socks with individual toes can sell well,” concludes Romanovs.

It would seem that airlines need to get a firm foothold (excuse the pun!) in this sector.