Cappell makes landmark speech on "retailer value"

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Speaking at the ACI Airport Business Conference in Hong Kong yesterday, Nestlé International Travel Retail general manager, Dan Cappell, gave a wake-up call to the airport community in a hard-hitting though constructive presentation. The industry - landlords, retailers and suppliers - he said, has to escape the vicious cycle of bid, counter bid and the historical evolution of the airport business that is holding back growth.

"Value for money, activities to drive penetration in store, exceeding customers expectations are rarely discussed," he said. "The bottom line is that an operator has a limited period for the concession and has a massive minimum guarantee to the airport authority, therefore their sole objective is to generate the highest possible revenue retention."

"Many of you will be thinking 'wait a minute, it is not the airport authorities who are making these bids, this is the responsibility of the operators'. To a degree, I agree, however the historical evolution of this business and the consolidation within the global retailers only perpetuate the vicious and unproductive commercial cycle even more."

Although speaking from a Nestlé perspective, Cappell said he represented the vast majority of suppliers in the desire to bring new thinking to the way airport retailing is structured.

While the travel-retail industry has matured, and shown consistent growth, retail statistics don't present such a rosy view of the business, Cappell told the audience.

"After more then 30 years the global average penetration in store after passport control is only 30%. Even worse is the ratio of penetration to purchase at only 50% on average. Only 15,000 people out of every 100,000 passing through your airports actually buy something. How much time and money do we all spend on finding out why the 70% do not enter any of the retail environments and why only 15% of those who enter actually buy something? Historically airports have always had a huge price advantage on specific categories, tobacco, liquor and fragrances for example - it was easy money with little focus on retail theatre, little focus on added value and total consumer experience. If you talk to operators and suppliers, the ideas are there and the will to change is there."

• The full text of Cappell's speech will be made available online on TRW. Watch homepage for details.