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Despite some temporary , travel is still on the rise compared to a year ago, and airports and hotels are filling up again. This is great news for airport-tech retailer °®¶ą´«Ă˝app, which is expanding into hotels, casinos, and airports across the globe. We spoke with Pete Newbould, managing director & SVP of °®¶ą´«Ă˝app Stores, and Eden Goldberg, VP of marketing and business development at °®¶ą´«Ă˝app Entertainment Group, about the airport retailer’s distinct approach to CE sales, its expansion plans, and how it spent the past year and a half of reduced travel traffic.
Eden Goldberg: We started in 1997 “rent-tailing” DVDs and DVD players between Seattle and Minneapolis. Our stores carried a small selection of retail products, the top 10 DVDs at the time, and a couple of different models of Panasonic players and headphones. In 2005, we merged with Altitunes, which was the prevalent airport retailer of CDs and DVDs, as well as some portable electronics like the Walkman, DVD players, and headphones. That marriage really made sense from a consumer standpoint and the stores were in complementary markets from the Northwest to the Southeast. So this really helped jumpstart the network of stores. And then, as products started evolving and price points came down, DVD players became less heavy, which helped us migrate more into a retail environment for consumer electronics and entertainment products.
In 2018, we were purchased by WH Smith, which acquired Marshall Retail Group (MRG) around the same time. MRG mostly runs convenience stores and gift shops in resort hotels and casinos. We’re not only providing electronics to existing MRG stores, but we’re also opening up hotel stores under the °®¶ą´«Ă˝app brand now. Right now, we have about 120 stores across the globe and are about to add an additional 18 stores at different U.K. airports.
Pete Newbould: About 15 years ago, WH Smith actually had quite a substantial business in the U.S. in hotels and airports, mostly doing news, gifts, and bookstores, but then we exited in 2003. We never stopped looking at the U.S. as being a very attractive travel market, but one where there are already some very significant players. Looking at the current trends of bids for airport space, we saw that it was going to be tough to do if we didn’t have a kind of a substantial base from which to build.  In order to break into it, we realized that we would need to acquire businesses, which is why we and then . And then COVID hit, so we spent most of 2020 bringing the back end of those businesses together for the sake of efficiency, while ensuring they retained their separate identities.
PN: It’s a very different world from the mall, where you just pay the rent on the space and you more or less have it. Whereas for airports, all space is typically tendered competitively. And in the U.S., it’s done in a particular way that’s different from many other parts of the world. There’s a master concessionaire who sublets space to other retailers. So in bringing °®¶ą´«Ă˝app and MRG together, we’re now an effective master concessionaire bidder, whereas WH Smith, by itself, is not. We realized that we needed to be bidding at the level to achieve the level of success we want.
It’s also more difficult, logistically, than running a store in a mall or any kind of traditional big-box store. The customer mode is the most important thing, because their reason for being there is to get on a plane, not to visit shops. On one level, it’s great because we’re presented with customer traffic, and those customers waiting for their flights have time to kill, but we still need to get it across the threshold. And the space also tends to be very small when compared to , so we don’t have a lot of stock space and have to get stock to airside locations. We really have to think about what’s on the customer’s agenda, what products are going to solve their problems and meet their needs, what will inspire them to buy something that they weren’t planning to buy. With big-box retailing, you’re able to present the entire breadth of the category, whereas we really need to narrow down items.
The other challenge is that costs can be very high, since rent is based on a percentage of sales. And then, in terms of the people we hire, we’re not only looking for exceptional sales people who can empathize with the customer as they’re going through the airport and identify what their needs are, but also people that we can easily get planeside, since it takes time to get them accredited.
EG: People have that mindset of their destination, and not always their journey, so utilizing airport retail as a convenience factor is only part of the formula. We have to find the right solutions that don’t just help a consumer get from A to B, but actually get them to want to use it well beyond their arrival, so that it’s a qualified purchase, a qualified need. Sometimes there’s more of a perceived need — what happens if my phone dies, for example; it’s not quite life or death, but for some of us, it is. How do I make sure that I can still be in touch with my family, friends, and office? How can I make the most out of my trip by capturing the experiences that much more? How do I not only watch and binge my show that I’ve downloaded for my trip, but also use these two wireless earbuds when I work out at the hotel gym, and this charger or Bluetooth adapter? We’re here to provide a full solution and help enable that travel experience.
PN: Well, relative to other retail sectors, that could be right, but only if, as Eden just said, we continue to make sure that we’re relevant for the journeys that those passengers are on. We’re very good at turning a need into a want. In other words, if your need is a pair of earbuds to listen to music or watch a movie on your flight, we can facilitate that for you for $20 alright, but it will not be as good of an experience as more premium wireless noise-canceling products that might have a retail price of $200. We’re very good at walking people through the features and benefits of, say, noise-canceling versus non-noise-canceling, and what that’s going to mean for the entertainment experience on their flight. And then we’ll make sure they know that they’ll need a Bluetooth transmitter if they want to watch any movies that are part of the airline’s in-flight entertainment. The success of our business model is the ability to take the need for enough to consumers and turn it into a want that they become so satisfied by.
EG: It’s not just turning the need into the want; it’s also turning that need into a solution and supplementing that with another solution. And making sure that their products can be used in multiple scenarios.
PN: One of the ways we do this is by offering bundles, where for a bit more money, we will add on two products that are relevant to the initial product. So if you’re buying headphones, you might opt for a bundle that also includes a power bank and a Bluetooth transmitter.
PN: Headphones make up the biggest part of our business. Those would be followed by what we’d classify as consumer electronics accessories — cables, powerbanks, adapters, and cases. Then we’ll also have travel accessories like pillows, luggage, and other types of airport-relevant items. We carry different health and wellness accessories like FitBits and Garmins. And we sell GoPro cameras, though it varies by airport. Resorts airports, for example, sell many more action cameras than what I’d call classic transit hub or departure airports. It’s fascinating because the people who are buying these items have already been on their vacations. They might decide to buy an underwater camera on their way home because they’re buying it for their next trip.
EG: Our product assortment has adjusted to focus more on the leisure or work-from-anywhere traveler, versus the business traveler in which we had a great presentation of work accessories. So besides mice, Bluetooth keyboards, and laser pointers, travelers today are also looking for portable air purifiers, percussive massagers, and wearables for smart health.
PN: The consumer demographic has changed post-COVID. We’re seeing a younger, more gender-balanced traveler that’s more interested in personalization and fashion than spending $300 on a great pair of headphones, so we’re evolving to meet that more prevalent passenger. We don’t know if this is a permanent change or just temporary.
EG: We want to serve and offer the most cutting-edge electronics, but only if they’re ready for a traveler to use on their journey. So many of the products we carry are unboxed, charged up, and ready to be used. If we sell you a tablet or an Apple Watch, we’ll set it up for you with the right band and charger and insert a SIM card for you. If you buy a GoPro, let us at least teach you the 101 so that you don’t have to sit there with the instruction guide and hope you can figure it out on your tray table. That’s also part of the solution-based concept we offer.
It’s also a part of our DNA. Smartphones have changed everything, but even more than two decades ago, when we started our business, we would provide you the Sony Walkman, the disc, the headphone, and the batteries. When rent-tailing was a true part of our fabric, we’d rent you a DVD player in a carrying case with an exterior battery, two headphones, a Y splitter, and two DVDs, so you were truly solution-based for an entire journey. At the time, people weren’t of the mindset to buy a $1,000 DVD player. That was just mind-blowing, but now everyone’s carrying a $1,000 mobile device in their pocket.
PN: Right now, we have about 13 SKUs of °®¶ą´«Ă˝app-branded products — mostly good-value, high-quality accessories. Our own brand products are the Number Two seller after Apple products — and we see the opportunity to get up to 80 or 100 SKUs of our own brand products over time.
PN: It was unlike anything any of us have ever known. We went from the business essentially being normal at the end of February of 2020 to closing all of our stores by the first of April. They stayed closed for a couple of months, and then we gradually started reopening.
But you don’t normally get that kind of break in the day-to-day management of your business, so we did get a bit of an opportunity to step back and think about what categories we wanted to carry and how we wanted to develop and improve our business processes. And then, of course, we also started to merge the back end of the business with MRG. That was always part of the grand plan, but we probably brought it forward. That’s really the story of 2020.
PN: We were able to do a lot of things that might have been harder if our businesses had been at full tilt. So, for example, MRG has a long history of running stores in casinos and resorts, and we thought there was an opportunity to get °®¶ą´«Ă˝app into that space. We believe there are lots of opportunities for electronics retailing stores in hotels and resorts, both to facilitate gifting and self-gifting, as well quick replacements for chargers or cables. We’ve opened the first two °®¶ą´«Ă˝app stores already, one in the Forum Shops at Caesar’s Palace in Las Vegas and the other at the Seminole Hard Rock Casino in Fort Lauderdale. And we just opened our third store at Harrah’s in Las Vegas on July 2nd.
We’ll also be opening °®¶ą´«Ă˝app stores outside of the U.S. in Spain (Alicante) and Germany (Berlin). The latter store will open as soon as the new Berlin airport opens. And with Dixon’s pulling out of airports, we see new opportunities there.  We just announced that. Nearly all of these stores will be in locations that were Dixon’s Travel stores.
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