Airport Retail and the Changing Traveler | Marie Driscoll and Chad Hooker

Marie Driscoll:
Hello, Retail Rundown listeners. I’m Marie Driscoll, your host for the week, a managing director of luxury and retail at CoreSite research. Joining me today is Chad Hooker. Chad currently serves as the VP of operations, North America at Fluent Commerce, a cloud-native distributed order management system. Thanks for being here today, Chad.

Chad Hooker:
Absolutely. Marie, it’s my pleasure. Thank you so much for having me. It’s always great to have these opportunities.

Marie Driscoll:
Great. So Fluent Commerce helps brands and retailers provide a premium omnichannel fulfillment experience, but an order management system, from what I understand can also help improve the online shopping experience across other industries, such as well, airports and their tenants’ stores at Coresight where my main focus is luxury and fashion. I believe this greatly coincides with travel and airport retail. So, can you kick us off by just talking a little bit on your view of the current state of the retail industry and its impact on the pandemic and rather the impact of the pandemic?

Chad Hooker:
Oh, absolutely. You know, fear surely from an academic perspective, it’s really been an interesting story to watch unfold with many twists and turns. You know, we learned that the typical picture of supply and demand can change in an instant across the board. You know, sure. We’ve seen local as localized disruptions in supply and demand with weather events and so on, but nothing on a global scale with COVID we saw it everywhere. And in all industries, for example, the most visible in the most disheartening was the ICU hospital bed utilization, for any given city, the number of folks that needed beds and the number of beds available with the appropriately trained staff was somewhat imbalanced. Sure. There are hybrid or step-down beds that allow for them to flex for temporary spikes, but for the most part, everything was imbalanced until really it wasn’t in retail specifically, we saw labor shortages due to lockdowns, coupled with panic buying completely obliterating stock levels.

Chad Hooker:
We saw inventory that got orphaned in the supply chain with the different levels of lockdown in different areas. You know, one retailer had warehouses and stores locked out in the Northeast, but their stores in the south and say like North Carolina were available for pickup, but they didn’t have the ability to ship from that store. So that inventory was effectively orphaned or constrained to just that local market of folks feeling brave enough to make it to a store. The retailers that could accurately promise against stock, not physically on hand were succeeding, keeping the customers off Amazon. The problem was that most of those retailers and brands had very basic capabilities and promising against that inbound inventory. Most of them simply assume a regular schedule of replenishment, not actually tied directly back into purchase orders or transfer orders back in the supply chain. And then when that regular schedule of replenishment broke down, so did their ability to accurately promise and deliver to those customers.

Chad Hooker:
Then when, when we saw stores starting to open back up and shipping from those stores was available. The retailers with very simplistic orchestration logic that maybe only looked at say the distance as a crow flies for the customer to the store, found themselves with some stores that were extremely overwhelmed and other ones sitting idle. If they could’ve just made better sourcing decisions based on inventory levels and specific stores, current orders, awaiting processing in a store, or maybe even individual store performance and throughput, they would have been able to get back to that balance and load that a bit better. The moral of all of the story is that retailers and brands with systems in place that were just based on basic assumptions of supply and demand really struggled. The pandemic proved that agility and modern tech that can adapt to these dramatic swings was a must. For example, one of our multinational retailers that were on Fluent that had never shipped from their stores pre pandemic, had only used them for click and collect when the lockdown happened. They were able to make some simple changes in Fluent and they were able to pivot quickly and ship from all of their stores that they wanted to within five days. Yeah.

Marie Driscoll:
Amazing. I know that its public knowledge that Target has been able to ship from stores for 90% of its online fulfillment. So it’s amazing how some retailers have been able to use their proximity to the local consumer local demand and meet online orders and really capture, share, and do a fabulous job. It has been and yet still we’re dealing with supply constraints globally and it looks, it looks like there’s further, it’s being exacerbated by port closures in China again, but let’s talk about airports. What, tell us what you’ve seen in terms of retail stores at airports and how they’ve been impacted.

Chad Hooker:
Yeah, for sure. So, in my opinion for airports specifically, the pandemic hit at the absolute worst time for airport retail. Back in 2018, 2019, we were starting to work with airports and airports were starting to see themselves differently and starting to see what the airports of the future might look like. They, the airport was becoming that final frontier of omni-channel retail disruption, almost boldly going where no airport had gone before. They were allowing folks to shop across all of the tenants within the airport. Within one single digital interface not just individual stores or individual tenants walking into those specific stores, but a digital experience across all of those. Being able to shop and then be able to pay for their items and then have them ready for them either at their arrival or their departure gates. And then what was happening is airports are starting to see themselves as a marketplace that they could aggregate the offerings of all of these tenants to provide an omni-channel and cross-brand shopping experience. But, sadly when all the passengers went away, so did this drive for disruption. You know, the good news is in the last quarter. So we’ve started to see some of these airports starting to think about this again and ask questions. So it’s been a really exciting time for us.

Marie Driscoll:
Yeah. And what’s so interesting is that when people are traveling, both business travelers and people on holiday. The average consumer, they’re stuck in the airport, it’s sometime, what are you going to do? If you’re a business traveler, you deserve a reward for traveling on business, and maybe you have to take something home to the family. And if you’re traveling as a regular consumer, it’s like an opportune time to shop. So really it’s such a great place for people to shop. It’s a great place for retailers. So it’s great to hear you say that it’s beginning to come back. So what challenges do the airports face that mainstream retailers don’t?

Chad Hooker:
Exactly. Right. So, surprising only those quite few. One, everyone assumes that a retailer has a digital presence, an app, and omni-channel fulfillment airports don’t have that luxury of assumption. If they were to kick off these cross airport type commerce initiatives, they would have to put out big press about the capabilities, just to set the stage and get the word out. But then time will move on. People will forget. And then as they start to book their travel, then you’ve got to remind them of those omni-channel offering somehow. So, airports then could tie in with the airlines to deliver ads, like at the point of purchase. So the tickets use push notifications from the airline app, reminding them of the offerings pre-departure during the flight. But then you suffer from another issue is that when customers are on a flight incoming into an airport, they need a connection.

Chad Hooker:
And so you’d have to work with the airlines to either open up maybe the way for customers to get to that site for free, or expect customers to pay for that onboard wifi at that time. And then while some traditional retailers are providing these marketplace like capabilities, it really is a must for the airports. If they have any hope to directly reach the customer and provide this experience in this airport of the future, this airport does serve as that marketplace surfacing up the items and inventory and availability from all of the tenants in the airport, but being marketplace, the airport must provide a mechanism that’s easy and intuitive for the individual tenants to manage all their items and their inventory data. Thus leading to that cross brand shopping experience where a shopper may or may not know which tenant they’re actually getting those items from.

Chad Hooker:
And then in another challenge is timing of fulfillment can also be a challenge for airports. You know, typically airport gate schedules are published, say 30 days in advance. So the decision of which store, which tenant to source from can be made then, or can wait closer to the flight date for low volume are low value, high volume items. This may be okay. I may be able to bet that that item will actually be available 30 days from now at that flight time and not have to reserve or tie up that area early for high value, low volume items. You know, like lock downs, let’s say like cameras or camera lenses, you might not have that luxury. In this instance, the airport needs to understand the frequency of replenishment there’s to know if they should assume that that item will be there in 30 days or not.

Chad Hooker:
And if they have that ability to see into that replenishment schedule then maybe they could promise against that inbound inventory, not one that’s on the shelf, but the inbound inventory and leave that high-value item on the shelf for say that 30 day window, thus allowing for grab and go customers within the airport to actually pick it up. But one of the things that comes to mind is the duty free throws a bit of a curve ball into the mix for airports. The airports have to deal with the restrictions of duty-free, especially with alcohol and tobacco. Each country has restrictions and limitations. So airports need to be able to programmatically limit the sale of this based on the local laws. While this is not all in all, all that unique, what is unique is that the family can combine the limits based on the number of travelers together.

Chad Hooker:
So airports have to understand and process these restrictions based on the combined limits of a reservation, not just an individual. And then while traditional retailers offer, click and collect and ship to home, airports have another layer of complexity on that click and collect experience of collecting at the desired arrival or departure date or terminal. The arrival and departure spots can change at the last moment, which means that the systems need to completely reroute and re identify where the items need to be picked up and dropped off. And then finally, airport retail was never really designed for them pick and pack operations or stations. So they really need efficient systems to tell them when to pick and pack. So that inventory doesn’t just pile up at a staging spot and they need intuitive and easy to use applications to reduce that time off the floor that they would be with customers.

Marie Driscoll:
You know, Chad, it reminds me of a lot of conversations that I have at CoreSight with retailers and other tech companies that talk about how the shopping center, the stores in a shopping center, in a mall, many of the, you know, the smaller specialty stores were not designed for pick and collect. They were not designed for ship from store, right. They were designed for people walking into the store and buying and taking home. So its similar kind of disruption with added caveats of, as you said be the duty free element. And When people do purchase this way, is there the opportunity for the product to be sent to their home? Kind of like on a Farfetch where you’re getting Farfetch is being interfaced with all these different boutiques around the globe and you’re buying from one of them and you don’t necessarily know which one it’s from until you get the delivery and it’s sent to you, and there’s no complication with currency or with duty. Yeah.

Chad Hooker:
Yeah. Good point, Marie. And for some airports right now that that could be the only option. It’s definitely one that’s in the arsenal. And it could be as passenger loads are increasing that may be the best option, to use that as just a delivered to home. They may and in, during this time of using it just as a pure ship to home model, it could be an opportunity that as the loads are increasing, to give the airports the time to kind of sharpen the pencil and sharpen the processes to be ready, once the travel picks up again.

Marie Driscoll:
Right, right. Yeah. It’s like there’s been a lull in travel and it’s gradually returning. And a lot of business travel has been on stall on hold until maybe 2022. I know I’m doing a little bit of attending some conferences in the fall but it seems so tenuous. You don’t know how many people will go, but 2022 should be a good year. So tell me how would an order management system benefit an airport and their tenants stores, and like, how would, how do you see this improving the overall experience for travel shoppers as they return to traveling?

Chad Hooker:
Yeah, for sure. So let’s just chat about those different personas that you mentioned. So, you know, for the tenants within the airport, the OMS system or the order management system becomes the home of their inventory. It also provides them a mechanism for alerting store associates to pick an order when it’s time to do so. And again, it goes back to that efficiency and ensuring that it’s the right time and it’s not just creating a staging issue. The store associates are also using the mobile devices to scan that item out of inventory, put it on a fulfillment so that it, so that it can be picked up and taken by the airport associates to a collection point to have it either, as you mentioned, shipped home to the traveler or have had them pick it up before they depart.

Chad Hooker:
And then for the airport persona, the OMS then is really the aggregated view of all that inventory across all of those tenants. And then the OMS also provides a place to define the rules for, for orchestrating those orders. The airport can configure the OMS to source from the tenant, simply based on the proximity to that collection point. Or they could maybe look at it in terms of the tenants that had the fastest processing time. So if the order time and the collection time have a really short window, then maybe you would want to have it sourced from a tenant that’s known or has a track record of being able to source and process orders fast. You may want to source it from a tenant or a store that has the most inventory, so that you’ve got a pretty good confidence that the inventory is actually there.

Chad Hooker:
And they could be able to fulfill from there and so on. And then the OMS can help define the rules for what happens whenever that gate change does occur or flights get canceled or moved at the last minute. The OMS can then help direct folks to know where to go grab items and help drop them off. And then those airport runners that are, that are going between the different tenants, they would be using OMS mobile devices to know which of those tenants to go and grab those items from and which collection point to take them to. And then once they get them to the collection point, at that point it’s just a disparate group of items. And so the OMS can then direct that collection staff or those runners on how to consolidate all of those items into the specific order so that the customer demand can be fulfilled.

Chad Hooker:
And then the last person, I guess, would be the, the shoppers and in this situation, convenience is king. Imagine this, if you’re landing late in Miami and you have big plans to hit the beach in the morning, and you could try to have your Uber drivers sit outside of a store that may or may not be open when you get there, while you run in to get that hat and sunglasses and sunscreen that you forgot, you could also go also risk, maybe the hotel gift shop with the extremely high prices that you would incur there. Or imagine this, you could use your mobile phone or your laptop or tablet on the flight, into Miami, be able to shop across all the stores inside that Miami airport and have everything ready for you at your arrival gate. And then imagine this, if you were flying to meet family and friends for a reunion, you had planned on grabbing a few things during your layover, say in Chicago, your flights delayed coming in, and now you have very little time, if you could shop across all of those stores and pick up a mix of items.

Chad Hooker:
So if you have toys and clothing and perfume and bottles of wine, and maybe even that, that camera for yourself, just imagine how incredible it would be. If you could have all that waiting for you at your final destination at that arrival gate, so that you could be on your way.

Marie Driscoll:
So this sounds like a great way for travelers to spend on the flight, right on their last flight or even on their flight, going to a place, the Miami example, the Chicago example. So this is such an interesting B2B to C model. How do you see tell me the retail, are the airports adopting this? How are the retailers adopting this? I think consumers would certainly benefit from the immediacy, the ability to get the need, to meet their needs at the last minute. Also, just the more retailers that are on a platform at an airport just provides a fun shopping experience. So tell me, how you’re working directly with the airports and are the airports pulling in the retailers? How’s that work? No.

Chad Hooker:
Yeah, for sure. And that’s the key, right? Is that it’s got, there has to be a value to every party involved, right. And so for the airports, they see it as obviously a new revenue stream and a new way to get access to the customer and to the specific behaviors of a customer and the buying behaviors of a customer. And then for the merchant, it gives them the opportunity to maybe pick up sales that they wouldn’t, they may, maybe they might’ve missed out on because of short timeframes or whatever. And then so it’s really is a bit of a balance though, because there can be some say issues between figuring out which store to, to source from if a bottle of perfume is at duty free and at the brand store. Well, which one do you pull from and how, how do you maintain that fairness? Again, it goes back to your source it from, from some sort of logic on distance on throughput. It there’s lots of the work. I think it’s definitely, as I mentioned before, I think this is the last frontier of omni-channel retail disruption, because it’s the one that hasn’t been tapped yet. And I think we’ll start to see this going forward.

Marie Driscoll:
So, it’s some of the work that I’ve done in the last 10 years with shopping centers, and we saw them wanting to create apps that would enable the shoppers that go to their local mall. And usually shoppers don’t know the name of them all. They just call it a local mall. They don’t know if it’s Simon’s or Westfield’s or whatever. And they know the department stores and the specialty shops that they shop. But so the mall developers were thinking, let’s create an app so that the shopper can see their favorite stores in the app and set up, like do a search for white denim size 28, whatever it is. But there was some reluctance on the part of retailers to be that close to their competition in and out, because out of fear that the consumer wouldn’t go into the store and check it out.

Marie Driscoll:
And, you know, once a consumer is in the store, the ability to convert them as better, especially if there’s a good sales associate. So there’s were some sticking points, but certainly, the shopping centers realize that an app for the consumer was helpful in terms of central pickup. And COVID may have changed this going forward for retailers to combine because they did have curbside pickup that was centralized with COVID. But in the case of like a shopping center, they could help you find a place to park. They could get you a reservation at your local, at the pizzeria, in the mall, that kind of thing in the airport. Do you see a reluctance for the retailers to kind of join forces and be in the same app? Like we’re talking about for this omni-channel marketplace shopping experience?

Chad Hooker:
Yeah. I think it’s the fear of the unknown, right? And I think as these are rolled out then it, from the tenant’s perspective, then the adoption will help in increase the experience. Right. And I think from the airport, we know that airport retail will for sure, sputter for a bit as we get through the variants and the vaccines and everything. But, but as we get back to something our old normal, I think that airport’s really going to embrace the fact that consumers have become familiar and expect a digital experience in all aspects of their life. I feel that at some point airport shopping will be no different. And in this it’s going to be the same. It, convenience is going to be the battleground. And in any scenario, airport or traditional retail, better experiences means more loyalty. Now I wouldn’t want to claim that availability of a shopping experience is going to be a driving factor in the near term of, of when you, which airport you choose to fly in and out over through. Although I do think that it would be a contributing factor with, along with price and location and access to public transit and so forth. But again, as that adoption increases, I feel so will the expectations that this is available.

Marie Driscoll:
Oh, and definitely travelers talk about a great airport shopping and the different, like what you can get in Paris and London and Chicago, that kind of thing. I just went through LaGuardia and here in New York city, and they’ve, it’s in the process of being refurbished and it looks lovely. And they had a section that was very New York centric. And I bought a tin of chocolate, not even a half a pound for $41, because it was like an old retro New York brand Louis, I think it was Louis Sherry, but when you’re sitting in an airport waiting an hour, and then your flight is delayed. There’s so much opportunity to buy great stuff. So airport retail really is an opportunity for brands, for retailers, for tech companies, for airports, for the whole ca bang, for the entire retail ecosystem. So what challenges do you see if airports really don’t adapt these technologies and systems?

Chad Hooker:
Yeah, I think it’s going to be, it’s kind of the, the Amazon application of everything is that there’s the expectations that consumers have maybe in tangential or other industries are going to spill over. And I don’t know, like I said, will customers make that a deciding factor to fly through one airport to the other don’t know in larger cities, like you mentioned in New York where you’ve got three airports that you could choose from it could become a deciding factor along with some of those other decision points.

Marie Driscoll:
Right? Like how long does it take to get to the airport? Yeah.

Chad Hooker:
And I think, that’s another good point on the flying through. Let’s say that a given airport has a great shopping experience, but because of the countries you’re flying to and from you’re constrained to a given terminal, and maybe those stores are not in there, but being able to shop across all of the tenants and be able to create that order, then that then that airport or runner could grab it from a terminal that you physically, they can’t get into and be able to bring that into you. So I think there’s going to be lots of use cases that come up in this, that we’ll see, that’ll, it’ll continue to unfold the story for us.

Marie Driscoll:
Yeah. I think you’re right, because there are, that happens to a lot of people. You think that you’re going to be able to shop that terminal and nope, you’re not going there. You’re in terminal E, not terminal A and that’s it, but with your solution with Fluent, we would be able to access that other terminal, the retailer’s there and pick it up on our way on our way to the next flight. Right.

Chad Hooker:
Exactly.

Marie Driscoll:
Yeah. Well, where can our listeners go to learn more about how Fluent Commerce works and more about you?

Chad Hooker:
Yeah, absolutely. For sure. You can definitely check out our outside of fluentcommerce.com and I would definitely follow us on social. We are lucky enough that we have a fantastic marketing team backed up by a lot of really great industry thought leaders within the team that just results in some really great content that’s relevant and very valid.

Marie Driscoll:
Oh great. Okay. So we should check out your website, find you on social. This has been really a wonderful conversation.

Chad Hooker:
I think we’ve done a great job covering the topics it’s for sure, the new frontier and the new way that airports are looking at themselves, and then it’ll be fun to be part of the story of this one.

Marie Driscoll:
Yeah. I, I think that it’s great to see this happening in travel retail, which is a small ecosystem of overall retail with added complexities that most retail does not have though online has its share of them, but it would be interesting. And, and I really do think that this will evolve and become part of your typical shopping center as retail continues to evolve in 2021, 22, 23. So thank you.

Chad Hooker:
Asolutely. Thank you for allowing me the opportunity to be here. It’s been wonderful to have this conversation and look forward to future opportunities.