In one of my previous articles in Tnooz, I explored the nature of in-flight retailing, its current state of affairs and where it was heading.
NB: This is a viewpoint from Abhishek Singh, product manager for tourism and hospitality at Infosys.
Some of my crystal-ball-gazing has started to unravel. One of the key components of in-flight retail is food and beverages (F&B).
IdeaWorks recently published a report titled Economy class meals get an a la carte upgrade, covering six airlines - Air France, Austrian, Condor, Hawaiian, KLM, and US Airways and drawing parallels with cruise lines that embraced specialty dining a decade ago.
To quote from the report - "Consumers appreciate the better food quality and convenience of knowing a meal will be waiting for them".
Customers are easily swayed in favour of in-flight dining rather than eating at airport before the flight. It also talks about KLM’s “Choice and Control” strategy for meals.
The primary message in the report is that creating a dazzling in-flight dining product with customer having control over choice invariably leads to higher revenues and profits that it steals away from the airport restaurants/outlets.
However, this obviously comes with added responsibility for cabin crew who are not particularly enthused about it. Although there are industry reports that suggest that F&B and inflight retailing do not attract any new revenue and/or passengers, there is also a contrasting view that suggests that these aspects of the flight contribute significantly to the overall travel experience for those passengers already flying with an airline. I subscribe to the latter, may be because I like to build memories based on quality experience.
Examples are sprouting up, in all geographies, of airlines using tablets like iPad with mobile point-of-sale solutions like Square to deliver a superior on-board retailing experience for passengers and cabin crew alike.
These developments are in line with my assessment. Airlines have to look beyond their traditional ticket sales to expand their revenue base.
Airlines tend to think of themselves as basic transporters and passengers as commodity/goods that need to be transported. This perspective must change.
Passengers are actually a set of captive audience that unfortunately is tied to their seats for long hours and has very little contact with their loved ones, colleagues and friends on the ground.
So, what is it that an airline can do for them, be it from the perspective of entertainment, service, shopping or simply letting them stay in touch with their loved ones on ground?
In my opinion, airlines have to start thinking of themselves like shopping malls, Facebook, TV, eBay and most importantly Amazon.
Here, I take a lateral view at five other industries which offer valuable lessons for inflight retailing.
1. Lessons from shopping mall – Window shopping leads to wads of money
People love to browse and window shop but in the process always offer a bigger share of their wallet than they would while doing pointed purchase. This has got to do with enhanced quality of experience that a mall offers compared to a mom-and-pop outlet.
Look at the evolution of any major city in the world. During the days of mom-and-pop stores, people go to a shop knowing exactly what they want. When these are replaced by malls, people go there just to ‘check-out’ the mall, eventually invariably buying things at twice the price of a mom-and-pop outlet.
2. Lessons from Facebook – Staying in touch is important to people
People love to stay in touch with their friends, colleagues and loved ones and are willing to spend great amounts of time and effort to do so.
Just look the meteoric rise of Facebook. This means inflight connectivity and Wi-Fi are an absolute essential for airlines to install. When making that happen, if airlines want to sell some premium packages, the passengers would pay – gladly. Japan Airlines seems to be going a great job at it.
3. Lessons from TV industry – Freemium
Advertisements can be tolerated when served with quality entertainment, but give me the option to pay and watch what I want.
People love to watch quality entertainment for free and hence are willing to tolerate the advertising world but when it comes to premium content, they are equally willing to pay for it. Just look at the evolution of pay-per-view TV.
I have never understood the lack of advertisements in my inflight entertainment, neither do I understand the lack of paid content.
I often miss certain key episodes of my favourite TV shows when on flight. I also have a long list of classic movies that I want to watch alone or books that I want to read – but no airline ever gives me the option to catch up on either.
I am willing to pay and I am not the only one. I was once so thankful when I got to watch ‘Citizen Kane’ on a Singapore Airlines flight under its short term Oscar special catalogue.
With the latest in inflight connectivity and ever lowering cost of digital storage solutions, it is a pity that Airlines are not capitalising on this to provide premium digital content – eBooks, songs and movies.
KLM’s Choice and Control strategy for inflight dining is also an example of this freemium model. Same philosophy can easily be extended to inflight entertainment for movies, games, TV shows, sports, news, etc. It can also be used to provide inflight connectivity – basic free package and premium paid high-speed connectivity for those who can afford it.
4. Lessons from Amazon – Personalised recommendations have huge revenue upside
Personalisation and recommendation will always help to sell more and at a premium. According to a report on CNN recently, Amazon has reported a 29% increase in sales (from US$9.9 billion to US$12.83 in 2013). To quote the report - "A lot of that growth arguably has to do with the way Amazon has integrated recommendations into nearly every part of the purchasing process from product discovery to check-out."
Need I say more!
Netflix at the height of its popularity attributed its success to the quality of its personalised recommendation system. It was willing to openly pay $1 million as “Netflix Prize” to anyone who could better its algorithm.
So whether they like it or not, Airlines must wake up to the cause of personalisation and recommendation since personalisation, from pre-trip to post-trip, seems to be the key to the future of passenger loyalty.
Once one of my friends commented, “if this airline just gave me a USB socket to listen to my own songs or watch my own movies, I would not complain so much about them” – a very simple expression for the need of personalisation.
5. Lesson from eBay and Paypal – Touchy, feely experience is not important for all products
If PayPal and eBay can help people do in-house shopping (not to forget the $3 billion Home Shopping Network), I am sure airlines can strike success with inflight shopping among its passengers especially if they have a sound supply chain (both physical and digital) behind it.
Coupled with the power of Augmented Reality and Wearable Tech, trying out digital versions of watches, sunglasses, hats, etc. should become feasible even while seated in your passenger seat.
With a little help of business process re-engineering and advanced technologies the time is ripe to start morphing traditional revenue channels into new more profitable ones.
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Reinventing the travel shopping process[/caption]
Overall
I believe any airline trying to gaze the crystal-ball to predict the future must look at the above lessons, if they wish to evolve into the next generation of their industry, more importantly be around for another 20 years without the fear of bankruptcy looming every alternate year.
Airlines, focussed on generating ancillary revenues, need to re-invent the next generation travel experience with inflight shopping at its core and integrated view of the pre-flight, inflight and post flight functions performed by a passenger.
Having a captive audience is a good thing!
NB: This is a viewpoint from Abhishek Singh, product manager for tourism and hospitality at Infosys.
NB2: Related read - Discover the ‘iPod’ in your travel business through cross-fertilization of ideas - here
NB3: Inflight image via Shutterstock.