With the recent news that Carnival Cruise Line is in the process of overhauling its onboard retail experience, TravelPulse discussed shopping trends with Miguel Maal, a partner at strategy consulting firm OC&C.
Maal provided an in-depth analysis of the present and future status of retail at sea:
TravelPulse: What differentiates the onboard retail experience from, say, shoreside malls and individual brick-and-mortars these days?
Miguel Maal: The three things that benefit cruises in respect to shoreside malls and individual brick-and-mortars are:
—A detailed understanding of the demographics and leisure “mission” their travelers are on.
—A keen mapping of the purchase preferences and behavior of these demographics when cruising.
—A known time of exposure to travelers, which they can design a “consumer purchase journey” around.
TP: What are cruise guests looking for in shopping that is unique?
MM: They are looking for a set of combinations between:
—A good “deal”, ranging from the tax-related upsides of being in international waters to not being abused given they have no immediate options.
—A retailer they perceive as genuinely sharing their passion for their preferred aspirational categories, with whom to exchange ideas and that can give them peace they are not in a zero-sum transactional environment.
—Opportunities to bond the travel experience and selected purchases into a meaningful, significant moment they can remember.
TP: Is there an increasing focus on theming the retail experience, a la Disney, and telling a story along with it?
MM: Disney’s overall strategy is to create “themes” it rallies all its revenue-generation activities around, in a way that each builds onto all other activities: content (movies, TV series, music, apps), theme parks, merchandising, brand licensing and—somewhat recently—cruises.
It is a compelling strategy because it poses a significant entry barrier given the scale that is necessary to make it profitable. However, Disney’s execution of this strategy is industry-leading and they maintain discipline in quality-based differentiation.
Other cruise companies don’t rely on themes but do focus their brands, ships and routes based on narrow segments (family, singles, retired, wealthy, etc.) and cruise missions (resort, party, explore exotic geographies, luxury, etc). Other ways to differentiate include:
—Experience in developing innovation in new builds, which is difficult to replicate.
—Lower price for similar experiences, based on larger scale and the ability to reposition and reroute older ships to more value-oriented service as new-builds come in.
—Variety of geographical coverage and cruise missions, which allows for a wider variety of offers for repeat cruisers.
—Opportunistic theming of cruises with less restraints to very rigid rules that Disney needs to abide [by].
TP: As land-based malls look to become more of a desirable destination over a necessary errand, how is the onboard experience similarly shaping up?
MM: There are a limited number of necessary errands while cruising, so necessity categories are a limited part of the business. Consumers are increasingly value-conscious for necessary categories, so abuses in pricing tend to generate increasingly negative reactions on cruises, as in other settings where options are limited.
More generally, retail is adapting to a wide set of changing behaviors by consumers, who are tending to think about their purchasing decisions in a more sophisticated way. Some of these trends are:
—Importance of convenience
—Redefinition of loyalty
—Desire for connection and trust
—Polarization of spend
—Response to experiential retail
—Sensitivity to provenance and ethics
Successful retailers will adjust to these trends according to their target segments and categories in different ways. The applicability of each of these varies across travel retail.
One key variable is a common segmentation between “value-travelers” who book based on deals and tend to make the most of a limited budget, versus “service-travelers” who pay full price, expect full service and will spend more freely if they are satisfied with the experience.
TP: Is it simply about more luxurious brands and specific stores like Apple or Harrods over generic ones?
MM: Retail is taking an increasing role in the majority of travel missions. Travel retail seems to be more brand-oriented than non-travel retail. As such, many travel destinations have migrated (partially) to a concession-based model where they cede space to brands, which can control the “retail experience” for their customers more directly.
This tends to be a solution which is more apt for high-end travel where there is a significant volume of travelers and [it] can sustain multiple brands. Some examples are lobby retail in the top hotels on the Las Vegas Strip, New York 5th and Madison Ave midtown shopping, Harrods in London, etc.
In cruises, this is not a proven model yet, although there are several pilots that can be understood in this way.
TP: What is being done to compete against online retailers such as Amazon?
MM: It is not clear whether cruise operators will compete directly or find a cooperation model with Amazon. This is an issue that is being actively explored today.
A possible, unconfirmed model would be for cruise operators to have onboard retail for categories that are not “natural” for Amazon. Categories that benefit from in-person experimentation, or that are sold in low volumes or where the average price does not sustain Amazon’s fulfillment costs are examples of these….
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