Travel, Retail and Hospitality have undoubtedly been among the hardest hit by the Pandemic.
In response, High Street operators have sought ways to meet the new challenges, including considering emerging technology and digital strategies that might have seemed difficult to implement or overly reliant on unproven methodologies in the past. At the same time, consumers have had to quickly adapt to new ordering processes and embrace different payment methods and increasingly flexible ways Merchants used to engage with them in their homes.
But what is the old adage? “In adversity lies opportunity” Those businesses that have invested in digital strategies; not just at “Point of Sale” but across the full end-to-end sales fulfilment, might just have stolen a march on the larger more unwieldy retailers and be better placed in years to come to provide improved, tailored customer experiences. Backed by Data Driven Analytics, flexible order fulfilment and tools to change a “customer” base into a loyal community, Merchants are increasingly able to make the customer experience easy, engaging and reliable.
Here at Versilia, we wanted to give some thought to how these trends might soon echo throughout the Airline retail sector, as Merchants in all spaces realise the value of the combined business and customer data that might already be at their fingertips.
The rise in card payments over cash and increasing use of Contactless payments over chip & pin or swipe, were already observed before Covid-19. Whilst even the most optimistic timescales for the mainstream adoption of areas like contactless and E-wallets have been halved by the pandemic, a more lasting impact is perhaps on customer perception and expectation of these newer payment methods.
North America, observed a 40% increase in contactless transactions over swipe and an 87% rise from cash to card payments
For example, contactless payments are now seen by nearly 3 in 4 as “just as safe” as traditional payment options with speed and ease now being referenced as key behavioral drivers.
Regions that have been historically conservative in the adoption of “Virtual” payment methods; North America, observed a 40% increase in contactless transactions over swipe and an 87% rise from cash to card payments.
While the line between contactless cards and mobile wallets may already be blurred, mobile wallets and by extension “traditional” card payments themselves are being viewed as “limited” in the face of payment apps that offer integrated loyalty schemes. “Points-gathering” style incentives and cash back reward schemes suggest that it is no longer just about the goods themselves but improving and incentivizing the buying process for many consumers.
These add-on benefits are further blending with the rising popularity of “Buy-Now-Pay-Later” schemes that are simple for consumers to use and require the same technology they employ every day to shop online or order a takeaway. No longer are installment plans for large purchases alone. Many apps now allow not just redeemable points and cash back, but simple installment payments for a meal, seat upgrade or in-flight entertainment. Add the inclusion of cryptocurrencies into the mix and the end of traditional pain points like cross border payments / FX charges and declines represent an eminently realizable future.
In one UK Survey, almost 75% of consumers would be more likely to complete a purchase or choose a specific merchant based on the ease and flexibility of ordering. Merchants now need to think not just about the choice of ways customers can pay for their goods, but also how they order them and, to round things off – when.
In the high street, the growth of flexible ordering, collection and delivery over the past 2 years was beyond any estimation, but is it relevant for the airline industry? The combined delivery and takeaway markets surged in 2021, with a near £10 million (300%) growth on the figures of 2020. Maybe more interestingly, the average value of these transactions experienced an even steeper growth curve. Since the lifting of major restrictions, the volume might have dropped (marginally) but ATV has remained high and by late 2021, over 75% of Hospitality businesses have highlighted Digital Innovation as a major focal point in the coming years. In 2019, if you looked for any form of “automated” ordering (Kiosk/Click & Collect) you might have heard that they regularly increased Average Transaction Value by 20%. Variances by Merchant aside it proved a pretty accurate figure. By late 2021 – Some figures are closer to 30% increase.
But how might these developments come to be reflected in Airline Retail? Pre-flight and In-Seat Ordering might still be seen as “new” or “emerging” technology in this space, but with the decreasing cost of data and bold plans by at least two major Aircraft manufacturers, including Boeing, to push the digital revolution, how long before consumers come to expect the same flexibility and quality of Retail in the air that they would elsewhere?
“Expect” might just be the word. While Merchants might like the sound of higher ATV, this trend also represents a growing expectation around ease. Why can you not use your phone for a transaction? Why wait in line only to find that last sandwich has been purchased by the passenger in front when you when you can order from your seat? With Smartphone adoption being at its peak among consumers of all ages; as is the level of trust placed in them - language barriers, misunderstandings and mis-keyed data have all seen vast reductions as ordering and payment platforms become ever more converged on a single customer-owned device.
Making the experience easy makes it appealing and appeal creates need. In the Airline world, this adds something new to an area that hasn’t changed in years. Cabin Crew are not salespeople by trade and a printed catalogue seems increasingly out of step in a digital world (who else has shamefully dragged a finger over a page to try and zoom in!). Airlines that are open to linking their Booking and Retail applications and fully Integrating data points might find that they are opening the doors to a huge opportunity as they could grab passengers before they even enter the airport. Preflight advertising combined with easy, flexible payment options, and the certainty of a relaxed and tailored journey? That doesn’t sound so terrible.
The customer has never been more at the heart of a Retail approach. The last 2 years have forced the evolution of technology and customer expectations. Consumers can now be reached and engaged anywhere and anyhow. Some operators might be recognizing that the journey can actually begin at the booking stage. Understanding consumer needs, expectations, and personal habits will not only allow Merchants to engage with their customer base earlier and more effectively but add real value to the proposition that will drive not just a single “sale” but begin a reciprocal relationship that benefits both.
Merchants, Brands and Travel Operators can begin to realize substantial return on investment by knowing how to correctly gather, how to safely maintain and how to responsibly use customer data to create an experience for them that feels truly unique and create a genuine value proposition. Knowing what customers really want, whether that is low alcohol, allergen free options, a seamless ordering experience or something else means ancillary revenue streams do not have to be seen as “outside” the main sales channels.
Connectivity in every sense is the key here and being able to connect with customers before they travel could be vital. So too, is the ability to continue that conversation. Loyalty points and flexible order fulfillment strategies do not have to be limited to the more basic “earn and burn” strategies. While delivering purchases to customer homes might not be your thing yet, customers being able to use loyalty points from purchases made onboard that link back to promotional booking strategies will create synergies between Airline booking and retail streams.
Ultimately, with digital advances there are always pressures. Airline booking platforms, 3rd party travel systems and onboard retail devices are incredible sources of “Big Data”. But how connected are these systems to each other and how focused are they on the end-to-end customer experience? Turning this Big Data into Good Data is the key. Destination based content, tailored BOB offerings and onboard excursion packages – all these present opportunities that benefit everyone.
Flexible and easy ordering isn’t simply good for customers at the point of the transaction. Combined with a tailored experience and the creation of need, it will drive higher conversion and revenue. But when consumers download your app, sign on to your Wi-Fi, they allow you to engage with them outside of the constraints of a single journey; it becomes less about the sale and more about the lifetime relationship value of that customer to you.
Maybe the question also lies around the culture of change? Innovation is tough. Innovation after a pandemic is really tough! Limited space for goods, weight restrictions and supply chain resilience. These are all strategic calls that must be made regularly. The question might be - are we still making these calls on pure sales data alone or ideas grounded in historic purchasing patterns? Passenger demographics might not have changed much, but it appears, even among the frequent flyers, expectations have.
So, what does this all mean for Airlines who are rebuilding in the post-Covid World? Is this type of digital landscape achievable for them? The reality is that the evolution of technology provides a multitude of options with the ability to tailor a solution to suit the needs of most businesses as they navigate this rapidly changing digital landscape.
Author: Frazer Braddock, EPOS Systems Manager, Versilia Solutions Limited
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