Why luxury retailers should target the lucrative travel segment in APAC

CHANGES in consumer expectations and behaviour, driven by growing digitalisation, have transformed the retail sector as we know it. While the shift is more apparent in mass-market retail, the luxury retail sector has not been immune to change.

According to a study by Bain & Company, the luxury market has been undergoing a generational shift, with 85 per cent of luxury growth in 2017 being fuelled by Gen Y and Gen Z. As a result of the growing influence of the Instagram-generation, luxury retailers have had to rethink their strategies. In the past, luxury would be defined with extravagance, indulgence and exclusivity. However, now, experiences have become a status symbol where goods used to be. The new generation of luxury shoppers are looking for moments that are Instagrammable, personalisation of their goods and services, and experiences that are inclusive.

Although this current landscape can be challenging for traditional luxury retailers in Asia-Pacific (APAC), there are avenues for growth that they can pursue.

THE TRAVEL SEGMENT

The travel segment in APAC has been booming. According to the United Nations World Tourism Organization, international tourist arrivals in APAC grew 6 per cent in 2017 to reach 323 million, around a quarter of the world's total, and APAC tourism has been outperforming all world regions in growth in terms of international arrivals since 2005.

The growth in the travel and tourism sector signifies a lucrative opportunity for luxury retailers, as this base includes individuals with high discretionary spend that complements the luxury retail market. ADARA's elite travellers segment shows a similar inclination towards luxury brands with elite travellers being 7.6 times as likely to have visited Dior websites and 3.2 times as likely to have visited Burberry websites, for instance.

It is no surprise then that we are seeing developments such as Singapore's Jewel Changi, a S$1.7 billion retail and entertainment complex within Changi Airport, looking to leverage the high purchasing power travellers have.

With this convergence in travel and luxury retail, marketers have the opportunity to use travel data to target and engage high value consumers. In addition to the data luxury brands may have on how customers behave within their shops and on their websites, holistic travel data can provide an enhanced view of the spending habits and luxury tendencies of customers and potential customers, outside the brand's domain. For instance, luxury brands have access to captive audiences at airport terminals. ADARA's data shows that there are over one million passengers heading to airports every day. Luxury brands can take advantage of what some have dubbed 'Golden Hour', the time spent in the airport terminal after security, to reach these passengers with relevant offers and experiences.

However, to get the most out of this partnership, it is essential that marketers understand how to effectively use travel data to reach valuable consumers in the luxury retail world.

LOOKING TO THE FUTURE

The convergence of luxury brands and travel will show no sign of slowing down as both parties realise the benefits of working together. Using travel insights, savvy luxury retailers can create highly personalised campaigns that truly engage their target audiences and build special experiences for these unique customers.

Fortunately for luxury retailers in APAC, there is no dearth of travel data. The region is home to large travel hubs such as Singapore and Hong Kong, with more than 100 airlines and millions of passengers passing through. By capitalising on travel data, luxury brands can reach more relevant audiences and target them with appropriate experiences.