Mobile market – the Future Airport/AOE roundtable

16 December 2016



At an exclusive roundtable event hosted by Future Airport in partnership with AOE, industry experts from some of Europe’s biggest and busiest airports met in Amsterdam to discuss digital disruptions to a rapidly changing commerce model. Bradford Keen reports on the event, which saw Kai Schmidhuber, senior vice-president at Fraport, discuss the power of being agile and adaptable to consumer demands.


Michael climbs into his Uber, headed for the airport. He’s on schedule to catch his flight when the jarring realisation hits him between the eyes like a jab from a young Muhammad Ali: he’s forgotten his anniversary.

This is what the more than 20 representatives of Europe’s major airports were asked to imagine at the Hotel de l’Europe. The evening’s topic was ‘The digital future of airport retail’, and was aimed at providing insight and strategy on how to extend retail opportunities beyond the “golden hour”, get spenders out of the lounges – virtually, of course – and use technology’s reach to grab hold of and shape consumers’ experiences.

These pressing retail considerations were embodied by Michael, our underprepared protagonist, who prevented marital discord by using AOE’s OM3 omnichannel e-commerce platform, recently launched at Frankfurt Airport. Using the Fraport app – Fraport being a German company that owns Frankfurt Airport and others around the world – Michael ordered something suitably fancy for his partner, which was then sourced, packaged and delivered to his boarding gate with plenty of time to spare.

Michael is just the beginning. The app can be used to receive real-time information about gate changes and flight delays, reserve a table for a meal at the airport or send home a case of the wine that paired so well with the schnitzel. There is even the option to order groceries while on the plane to be collected on arrival – the perfect way to stave off the despair of a barren refrigerator when returning home late at night.

Accessible e-commerce

“We all know that retailers are having a pretty tough time at the moment,” said Maureen Hinton, global research director at Verdict Retail, in her welcoming address, in which she spoke about how consumer behaviour is changing and physical stores are becoming less impactful.

“Travel retail has become very attractive because, at airports, you’ve got a captive audience. They’re there for about an hour, they’re probably in the mood to spend and you’ve got rapid turnover.”

Through digital technology and online retail, these factors can be exploited to increase profits and, of course, provide added convenience to consumers.

Therein lay the reason attendees sat beneath a 6ft chandelier, sipping French wine while the Amstel River flowed on, a constant reminder of perpetual change and motion. After a slight delay to the event’s starting time – presenter Kai Schmidhuber from Fraport found himself stuck in traffic, having chosen not to fly – Hinton handed over to AOE managing director and host Kian Gould.

Gould exudes the exuberance of the quintessential director of a tech start-up. Having founded AOE while still at school, he has instilled a youthful practicality in his business – his staff use scooters and, more recently, hover boards to traverse the office in order to maximise efficiency. Obviously, the added fun is a drawcard, too. But Gould did not speak for long, instead introducing Schmidhuber and praising him for the team he has built at Frankfurt Airport, which has allowed the pair to work on this exciting and, so far, successful project.

Today’s brick and mortar marketplace or retail stores that we see in airports are just a fragment of what passengers are demanding.

“I make a living bringing new things into the world – new ideas, but also new products and businesses,” said Schmidhuber. He was responsible for product development at DHL Parcel in Europe and can claim the victory of being “one of the first people in Germany to really enforce e-commerce”. He has worked with Amazon founder Jeff Bizos on Amazon Prime and built allyouneed.com – an online shopping platform of Deutsche Post, which is positioned third in the German market after Amazon and eBay.

It was at Deutsche Post where Schmidhuber’s platform earned over €1 billion in sales by implementing e-commerce capabilities. Before joining Fraport, Schmidhuber acquired some aviation experience at DHL by starting the first unmanned civil commercial drone operation.

“The DHL parcel drone is out there right now,” he said, “delivering parcels in some hidden valleys in Bavaria”.

At Fraport, Schmidhuber started the multichannel business, which has expanded over the years due to savvy partnerships with businesses such as AOE. He praised Gould’s company for its technical expertise, but also for its commitment to finding the best solution to balance Fraport’s technological aspirations and actual business needs.

Revitalise retail

Schmidhuber, while excited about the successes birthed so far by the OM3 platform, stressed to his attentive crowd that “all of the headlines” they will hear about are only ten months old.

“We are still in the phase of finding out, ‘Was it right?’,” he said. “We are piloting several things; we are in close cooperation with our partners and it’s still a phase of trial and error.

“It was part of the job to train the Fraport staff – we have a team of 70 employees – for agile management so they can handle new situations, and define business requirements according to information acquired in the test phase.”

Tied to the need for agility is the understanding that the powerful enabler of technology sits between changes to consumer behaviour and business opportunity.

Today’s brick and mortar marketplace or retail stores that we see in airports are just a fragment of what passengers are demanding.

Schmidhuber said that e-commerce makes for an interesting press release, but companies need to understand why they are implementing such digital strategies. The answer? They have to, if they are to have any hope of remaining relevant.

“In Germany, every household has about ten digital devices,” Schmidhuber said. While the exact number of mobile devices is uncertain – 4.8 billion, based on subscriptions, but that’s open to debate – this estimation is the clincher: “There are more mobile devices than toothbrushes in the world.”

Schmidhuber drops these statistics because many people own a mobile device and, more importantly, they engage with these devices in a variety of ways.

“We see it at Frankfurt Airport,” he said, “and I am sure you see it at your airports too: people walking around looking at their smartphones.”

This is a fundamental change in consumer behaviour, as it negates the treasured theory that after the stress curve – before and after the security check – passengers are more inclined to shop.

“No,” Schmidhuber declared. “After the security check, they are open for everything.” Retailers must now wrench back attention from Facebook, Pokemon Go and FaceTime. “We believe it is absolutely necessary to find new touchpoints and achieve another level of interaction.”

Schmidhuber warned the attendees that they might find it depressing that, while millions are invested into shiny shop floors and stocked shelves with desirable brands, it is not enough.

“Today’s brick and mortar marketplace or retail stores that we see in airports are just a fragment of what passengers are demanding,” he said. “We need to build an ecosystem that reflects the outside world, because the airport is not an island anymore.”

Big plans for small spaces

Consumer demand for digital is not the only motivator today; Schmidhuber added that there is simply not enough room left to expand retail capacity at airports. Frankfurt Airport’s struggle to add another terminal – given its close proximity to the city – means that upscaling cannot happen fast enough.

“We really needed to grow in the digital,” he said. “We needed to make new contracts with branding partners and retail partners, telling them, ‘OK, you can come to us in the next few years with the physical shop, but in the meantime, let’s start a digital way of working’.” Offering brands access to 160,000 passengers a day in exchange for early opt-in can expedite a mutually advantageous relationship.

“This big, ugly picture shows that getting the attention of passengers will be crucial, because they really are in a haze and distracted,” Schmidhuber said.

A platform that already commands the attention of many is China’s Alibaba e-commerce company. Increasingly, Chinese travellers are using Alipay – an arm of the holding company – to pay for their flights. Schmidhuber said that Alipay knows in advance where and when travellers will be, and controls the initial greetings and retail suggestions – even at Frankfurt Airport.

Rather than view this as unwanted competition, Schmidhuber suggested the power of partnership: “We have to build up alternatives and come to a state of technological maturity, to talk with Alipay and say, ‘look, we don’t have 100 million customers, but right now, we have 100,000 and we know about their shopping behaviour, and we have all the legal opt-ins to talk to them’.”

The convenience experience

It’s important not to confuse numbers with value. Tens of thousands of app downloads may feel good, but they need to lead to interaction and transaction to be useful. To do this, you need to give users something – chiefly, convenience and ease of use. This does not come from being the best e-commerce solution at an airport, but from being comparable to systems that consumers already use, such as Amazon.

“It’s about user experience,” Schmidhuber said. “It’s about service and convenience within the special context of the airport.” So far, consumers’ feedback from using OM3 has shown that they appreciate and understand how the platform is designed to simplify their lives.

“I am not talking about making a reservation and picking things up at a store,” he said. “This is basic and many airports around the world offer the service. It is the wrong interpretation of convenience; it’s crucial, when you want to go from engagement to transaction, to offer more than just the obvious.”

 

Schmidhuber said the strategy has evolved during this pilot period. Feedback has revealed what else
needs to be done, such as consumers demanding home delivery: “This worked out well for us, but we are not at the end of what is possible, and what is still on the track for us to do.”

 

Finding the right marketing strategy and tone is essential – and evolving. Using data in more responsive ways is also something Fraport and AOE are still learning. Real-time decision management, including newsletters and push notifications depending on passengers’ geolocation, are proposed next steps.

 

The overall message from the evening was clear: people like Michael will continue to need personalised and convenient purchasing solutions to meet life’s many demands, and retailers will need to adopt agile management and design practices to be able to provide them.

Kai Schmidhuber, senior vice-president at Fraport, addresses attendees.
Maureen Hinton, global research director at Verdict Retail.
More than 20 representatives from Europe’s major airports attended the roundtable event.
Among the topics of conversation was how airports can respond to changes in airport commerce.


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