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By sheer definition, duty-free retailing for American-based airlines is somewhat limited. The majority of air traffic takes place within US borders so the cross-border benefits that have sustained the allure of buying and selling “duty-free” has caused US airlines to abandon their proper market share. On a passenger traffic standing, 7 out of the top 10 airlines in the world are based in the United States, yet only 1 (United Airlines) cracked the top 10 in 2007 for highest in-flight retail sales. Generation Databank claims that in-flight duty-free sales in 2007 accounted for US$2.6 billion yet the Americas only accounted for 14.3% of those sales. Final data for 2008 has not yet been released, however with a regional growth of only 7.9% the Americas are still projected to keep the same market share. Airlines such as Korean Air and British Airways have an annual intake of over $200 million and $150 million respectively, whereas a dominant domestic North American airline like Southwest, who carries over 100 million passengers per year, doesn’t even make the list due to domestic traffic only. US-based airlines are starting to realize the importance of being creative with their onboard retail offerings in order to compete with those operators taking in hundreds of millions of dollars.
Let’s first take a look at the true appeal of duty-free buying. Duty-free simply refers to the exemption of consumer-paid import taxes on merchandise purchased in one country and taken into another. The consumer is exempt from paying the 30 - 40% import taxes and there is usually a very small discount given on some of the merchandise. Where does that reduction in price come from? Frankly, it is based on “volume sales”. The travel industry has the unique opportunity to sell to millions of people every day. The only other retail operation that could parallel this size would be the online community. Even then, the choices online are endless, but Southwest for example, has over 100 million consumers per year and once they are in the aircraft cabin, their customers are theirs and theirs alone.
A domestic carrier doesn’t have to worry about their customers being charged the30 - 40% import taxes, so the allure of buying and selling at a traditional duty-free shop holds no impact on airlines. The comparison one could make with an airline such as Korean Air, who is dependent on sustaining that $200 million annual revenue proves that a little added attention on in-flight retail has the potential to take an airline into heavy profits.
OnTouch™, the new merchandising arm of GuestLogix has already started to bring these opportunities to airline customers and is gearing up for the first deployment of this revolutionary revenue generator. This new service will allow SkyMall™, one of the most popular in-flight shopping catalogues in the world, to go electronic on mainstream airlines and is projected to bring extreme profits to one of North America’s most prominent air carriers. As the OnTouch™ Shopping & More category grows, buying and selling travel accessories, clothing, jewelry, household items, a variety of luxury goods and just about anything one could think of will be commonplace in the sky. The strength and popularity of GuestLogix’ Mobile Virtual Store™ retail technology, which powers OnTouch™ Shopping & More, has made way for projections of $2.4 billion in added revenues just for US airline customers alone, and all of this will happen with no additional costs or overhead to GuestLogix’ airline partners on a revenue sharing basis.
Air traffic is far too high within the US for domestic airlines to abandon their proper share of this “duty-free revenue playground”. While the new initiatives may not give them an upswing on the traditional duty-free rankings, their bottom lines will be exponentially strengthened over the next several years.
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