Airport Retailers Flying High
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By Celene Adams
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Kathleen and John Avila, managing partners of Avila Retail Development & Management, a Western and Native American gift company with 14 stores in three airports throughout the Rocky Mountain West region, might be airport retailers, but they're not flying by the seat of their pants.
The pair, who've built what originally started as a jewelry booth 27 years ago at an Albuquerque flea market into a $10.8-million airport retailing business, didn't get there by winging it. Instead, they've honed retail into a science.
Airport retailing is unlike any other type of retail, explains Kathleen Avila. It's not as simple as selecting a location and renting a store.
The Avilas got into the niche market in 1991, at a time when airports began requiring that a certain percentage of their retailers be "disadvantaged business enterprises" (DBEs). "There's something about small businesses, entrepreneurs, local businesses that brings a particular flavor to an airport environment," Avila says.
So, when the Albuquerque International Sunport began reconfiguring its retail concessions, the couple began "learning the language, how to calculate the strategies that are important in being successful in an airport. ... [For instance,] we learned what an RPE is -- 'revenue per enplanement,' or the people getting on airplanes," Avila says, adding that that's where business comes from, not from the people milling about.
However, to compete with other DBEs and to win a space in the airport, the Avilas first had to prepare a proposal -- a process they go through each time they open a new location.
Airports have strict requirements for their tenants, Avila says. Airport authorities decide what kind of retail clients they want, using a consultant. Once they have their design, they release a Request for Proposal, which lists specific criteria for designing the space, Avila says.
"It's got many, many rules, forms that must be submitted in a particular way. All proposals must be submitted in a particular order. There's design criteria that you must know because, literally, you have to design the space as if you were going to build it," Avila says, adding that putting together such a proposal can cost up to $20,000 and can take two months to complete.
The proposal, with adjustments, can be used repeatedly to apply for locations in various airports or within the same airport. But if it's successful, and wins the space, the resulting contract must be renewed periodically and a new proposal process is required each time.
Applying for several spots within one airport is key to airport retailing, Avila says, because it's traffic, not store size, that drives airport sales.
Consequently, the Avilas try to obtain several different storefronts in various areas of one airport.
For instance, the Avilas have three Fiesta Gift kiosks in the Albuquerque Sunport and two 1,000-square-foot stores, Fiesta Market and Earth Spirit. In Denver and Phoenix they have four locations in each.
The location of those storefronts within the airport is critical. For instance, after the September 11 terrorist attacks, being located by the line of travelers about to pass through the security checkpoint at the Albuquerque Sunport proved disastrous for business, as potential customers were held up in long lines. However, the Avila's second store, located beyond the security gates, served as a backup, as once travelers were safely beyond the barrier, they felt relaxed enough to shop. "Having a backup location is part of our strategy," Avila says.
But sometimes, what seems an ideal location backfires, as, for example, happened when the Avilas secured a spot in a Denver terminal where a major airline was based, only to find later that the airline had backed out of its agreement with the airport. Instantly, the traffic in that terminal dwindled to mere thousands, as opposed to the 19 million the airline normally would have routed through the area. Although the Avilas had a "backup" store in Denver, they are still paying for the loss.
To qualify to do business in an airport, a business must also specify its inventory. "Everything we do in airports needs to have a regional focus. To airports, it's really important that the product represent the area and the look and feel of the stores represent the region," Avila says.
For instance, from their Albuquerque locations, the Avilas sell Native American jewelry and compact disks (CDs), along with souvenirs, such as children's books that focus on New Mexico, and pre-packaged mixes for Chipotle corn bread or of Jalepe�o seasonings. But in Denver, they sell a "more Western" line -- like cowboy hats and Western clothes. In Phoenix, they were recently awarded two new contracts, one of which was for a new concept -- an "upscale" Native American store that will sell 90 percent authentic Native American crafts.
For all the challenges there are in airport retailing, however, there also are advantages. For one, airports keep track of passengers' shopping patterns and relay that information to retailers. "There's this passenger behavior. People want to get to their gate. People won't stray from their gate a certain number of feet," Avila says.
The airport also provides each retailer with information about their own and their neighbors' monthly revenues. So it's easy to track which areas have growing revenues, Avila says. "Because all the revenues and traffic at the airport are reported you know how much money is spent where. ... It helps you strategize where you might want to propose your business and you can forecast your [projected sales] better."
Seeing one's monthly revenues also helps to determine which products are selling well. Selecting inventory and deciding how to display it are especially serious decisions in airport retail because the speed of transaction is essential. The key is, "Not too many designs, ... not too many styles. We really focus it, so that you as the customer can see it, choose it and buy it -- quickly. "Airport shoppers have zero tolerance for lines. If they see three people in line, they may go to the next shop," Avila says.
But because airport spaces are small, typically there's only room for one or two registers. So, to speed up transaction times, the Avilas, in 2002, installed a computerized "retail management system" (RMS). "Lines just disappeared. Credit authorization that once took 60 seconds took three to six seconds, says Teresa Curl, vice president of operations.
The system, which cost about $5,000 per store register, helped the company overcome multiple dilemmas. "Efficiently compiling chain-wide purchase orders from our different IT solutions was impossible," says John Avila. "To see the big picture we [had to manually merge] every store's purchase orders into Excel."
Their pre-RMS structure taxed staff and encouraged under and overstocking. Now, the "complex logistics of airport delivery, security, high rents and the arduous compliance reporting requirements" can be managed more easily, Curl says.
The company also reduced by 80 percent the time it takes to create departmental budgets and can customize sales reports by item, supplier, category, department and site in order to see what's selling and how quickly, thereby refining their ability to make more educated buying decisions.
Training for the company's 135 employees has become more efficient. "We're developing training modules, so when a staff person is not very busy ... they can play a game on the computer ... about product information [or] customer service training," Kathleen Avila says, adding that the system also helps to reduce internal theft by 50 percent.
The Avilas also will soon be able to use the RMS to process jewelry, cutting in half their on-site receiving time of the $4 million in jewelry they order annually, while improving security tracking of costly items. This last improvement, however, might be just a little too efficient for Kathleen Avila. "Selecting the jewelry is one of my favorite parts of this business," she sighs.