In-flight retail getting off the ground
10 Nov 2007
On-board merchandising, or in-flight sales if you prefer, is a big business globally, which is now getting off the ground in India, spurred on by new airlines mushrooming around the country. It is a key platform for major brands to reach out to their consumer directly.
On the international circuit, Air India generated Rs10 crore in revenues from duty-free sales last year aboard its planes, and estimates it to soar even higher this year, thanks to its extended network and the launch of new flights.
A 20-year old veteran of the in-flight sales business, Air India earlier bought and sold items by itself, but has now outsourced this activity for some time, citing greater flexibility of the outsourced model. The duty-free concessionaires it has outsourced its in-flight sales to be able to buy items at much cheaper prices, as they leverage economies of scale buying volumes that are marketed aboard more than one airline. Also, inventory issues are also avoided by using the outsourced model, as in case a particular item does not retail as fast, it can be withdrawn without the airline being saddled with unwanted inventory.
Typical items that sell well aboard flights are liquor, cigarettes, chocolates, jewellery, aircraft models, etc. Prices aboard Air India in-flight retailing range reportedly from $7 (aircraft models) to $100 (watches).
Domestically, SpiceJet too is entering the in-flight retail space, reportedly having identified vendors and closing in on its product portfolio, while getting its logistics and IT backend for the acceptance of credit cards in place. Reports indicate that SpiceJet expects at least 1 per cent of its revenues to accurue from in-flight merchandising next year, and is reportedly looking to link its in-flight retail with its online model.
Low cost carrier Deccan may be best known for its economical fares, but it too very much into the in-flight merchandise business, in association with Delhi-based AVA Merchandising, having set up its flight banner "Brand for Less", which is conducts in-flight bidding. 3 to 5 per cent of the airlines ancillary revenues come from this business, which according to sources, provides enhanced customer value through in-flight sales. Deccan reportedly emphasises an eclectic product range every month, through brands including LG, Parker, Reebok, Foce, Roache, Mattel etc.
