Interview Transcript

Your client is a cosmetics brand which is looking to open a store at an airport. You have been hired to study and determine which airport should the brand open a store in.

Can you please provide more information about the company? 

The company is based out of US, positioned as premium cosmetic brand. It is currently operating in North America, primarily US and Canada and has substantial market share in this geography.

What is the primary objective of the company that it wants to achieve by opening the store at an airport? 

The company’s core objective in opening a store at an airport’s International Terminal is threefold: to advance its brand through international expansion, conduct market testing in diverse cultural settings, and enhance brand visibility across different geographies. By strategically positioning itself in high-traffic airport locations, the company aims to tap into a global audience of travelers, providing a unique opportunity to assess market reception and consumer behavior. The move aligns with the company’s broader goal of creating a strong international presence and establishing itself as a globally recognized brand.

 Alright! Has the company identified any specific airport? 

The client has identified Singapore and London as potential locations for opening their store at the International Terminal.

Is there any particular reasons for considering Singapore Changi and London airports for this venture?

Absolutely. The choice of Singapore Changi and London airports is strategic and aligned with the company’s objectives. Singapore Changi, known for its status as a major international hub, offers a diverse and extensive passenger base, providing an excellent testing ground for the brand’s global appeal. On the other hand, London, having some of the busiest airports in Europe, presents an opportunity to gauge the brand’s resonance in a prominent western market. Both locations boast high international traffic and diverse customer demographics, providing valuable insights into the brand’s potential success in distinct geographies. 

Do we have any information regarding the specific airport the client is pursuing in London since it has multiple airports? 

Well, the client is confused between Heathrow and Gatwick Airport given their unique propositions. What would you suggest?

The decision to choose Gatwick over Heathrow is based on a strategic assessment of our objectives. While Heathrow Airport has a larger overall passenger volume, it primarily caters to business travelers, and our target audience may be more diverse and representative of a broader demographic. Gatwick, on the other hand, attracts a mix of leisure and business travelers, providing a more varied customer base that aligns with our goal of testing the brand’s appeal across different segments. Additionally, the size and complexity of Heathrow, with multiple terminals and limited inter-terminal commute options, poses logistical challenges that could impact the accessibility and visibility of our store. Gatwick, being a more compact and traveler-friendly airport, offers a conducive environment for our brand to be easily accessible to a diverse range of passengers. Based on these reasons, the client should choose Gatwick Airport over Heathrow. 

May I know the locations provided for store by both the airports? 

Changi being in development phase is providing the space in a prime location whereas Gatwick being an old airport, is providing the space in the inner area of terminal which is not easily accessible. 

Can you provide some insights into the financial considerations for setting up the store at Gatwick and Changi airports? 

The costing for establishing the store at both Gatwick and Changi airports is almost identical. This includes expenses related to lease agreements, store design and construction, staffing, initial inventory, and promotional activities.

Are there any specific cost factors that are unique to each airport? 

The main cost factors unique to each airport revolve around marketing strategies to address the specific challenges and opportunities at each location. For Gatwick, the additional costs may include targeted promotions and efforts to enhance the store’s visibility in a less frequented area. At Changi, where the store enjoys a prime location, the focus might be on creating an aesthetically appealing storefront and leveraging promotional activities to maximize exposure to the diverse and growing passenger base. We are done with preliminary questions, you can go ahead with your approach.

Thanks sir, I will be assessing both the airports on different qualitative factors that should drive the decision to open store at which airport. In the qualitative factors, I’ll be focusing upon market testing which includes geographical mix, regional viability for our products and best region to establish the business leveraging our existing competencies. Next, I’ll analyze the competition in different markets aligning with the overall objective of the company. Further, I’ll check which airport’s ambience andfacilities align with our brand image and appeal to Gen Z who will be one of the biggest customer of the brand in upcoming years. At last, I’ll assess the terminals feasibility at the airports so that logistical issues can be minimized and footfall in our store can be increased. 

Sounds Good! You may proceed.

The company can start with market testing to understand people from which region/country buys their product and has repeat purchases from which particular region. The company can also check if the existing products suit the skin of people of which region and the company doesn’t need to put money and time in research& development for that particular region where they can start their business operations based on data collected from this store. Gatwick has more European Passengers while Singapore has a great geographical mix, being a major transit hub and a prime airport of Indo- Pacific region. Through this way, we can ensure that we get a mix of customers from Asia, Australia, Europe, Africa and America considering the vast operations of Singapore Airlines and South East Asia being a major tourist destination and Singapore in itself being a financial hub attracting lots of fluent travelers. 

The company can start with market testing to understand people from which region/country buys their product and has repeat purchases from which particular region. The company can also check if the existing products suit the skin of people of which region and the company doesn’t need to put money and time in research& development for that particular region where they can start their business operations based on data collected from this store. Gatwick has more European Passengers while Singapore has a great geographical mix, being a major transit hub and a prime airport of Indo- Pacific region. Through this way, we can ensure that we get a mix of customers from Asia, Australia, Europe, Africa and America considering the vast operations of Singapore Airlines and South East Asia being a major tourist destination and Singapore in itself being a financial hub attracting lots of fluent travelers.

Alright! Discuss the brand presence and customer attractiveness on the two airports.

 Gatwick airport majorly operates flights between European Union and England drawing a significant portion of passengers from Europe, where there are multiple well established brands in the cosmetic industry who have a loyal customer base from these countries, so there are less chances that these passengers would try to a new brand for them. On the contrary, there is no such case with Singapore as mostly western brands have presence here and another American brand can make its presence felt in Singapore. Also, people in Asian and African region consider western brands superior than the brands from their own country thereby making Singapore a good choice.

And how does the perception and facilities at each airport factor into the decision-making process?

Gatwick, often considered a secondary airport to London, has older constructions and fewer facilities compared to its newer counterparts. The trend of budget airlines dominating operations may also indicate a less affluent customer base. On the other hand, Singapore, rated as the best airport by multiple agencies, offers extraordinary leisure facilities, including a waterfall, children’s play area, and a full-fledged mall. Moreover, its accessibility to non-passengers for shopping makes it an obvious choice for our brand.

What about the consideration of terminals at both airports?

 Both the airports have multiple terminals and it may not be feasible for the company to maintain stores on multiple terminals due to staggering costs. Changi Airport has well designed inter terminal train service but there is no such facility available in Gatwick. Further, Changi Airport may get its new terminal by 2030 thereby increasing the passengers served, while Gatwick’s plan of expansion is still in pipeline with no proposal of terminal creation and just expanding current terminal making space for few more passengers. This implies that we will get a greater ROI in long run from Changi Airport. Based on these factors, we can conclude that the company should opt for Singapore Changi International Airport for its first international store. 

Alright! Can you provide an estimate of the expected footfall at our store in Changi airport? 

Sure, do we have an estimated number of flights operated from Singapore Airport in different segments like short haul, medium haul or long haul? 

Yes, approximately 1000 flights operate from Changi Airport but we don’t have segment-wise information.

Thanks for the datapoint. Now we know there are about 1000 international flights that operate from the Changi Airport. These flights vary in their capacities depending on the type of flight – short, medium or long haul. Thus we create two categories which are short haul and medium & long haul amounting to 40% and 60% respectively. The average capacity for short-haul flights stands at approximately 150 passengers, while the capacity for medium and long-haul flights is around 350 passengers per flight. Consequently the daily footfall at the airport will amount to 270000 visitors in a day. We will further classify these visitors in the basis of time spent by them at the airport1. Individuals spending 1- 1.5 hour account for 20% i.e. 54000 people 2. Individuals spending 2- 4 hour account for 60% or 162000 people 3. Individuals spending more than 4 hour account for 20% i.e. 54000 people It is assumed that there will be approximately 75% occupancy rate given the average standard vacancy rate in global aviation is around 25% due to cancellations, no-show, demand issues, unserviceable seat etc. Individuals who spend 1 -1.5 hour at the airport are not likely to explore the airport due to the time constraint imposed by security checks, immigration etc. thus eliminating them. From the remaining two categories a total of about 50% are likely to spend their time at the airport lounge . Consequently , the number of visitors likely to explore the retail space at the airport can be narrowed down to 81,000 i.e. the other 50%.

What promotional strategies can be deployed to boost our sales in this store? 

The company should consider collaborating with airlines for joint promotions along with special launch offers. Event marketing within airport can be a good way to attract customers in the store.

Can you suggest how the company should measure the success of this store?

 The success metrics will revolve around sales performance, customer feedback, and brand recognition. Customer feedback, both qualitative and quantitative, will be instrumental in understanding the preferences and expectations of the diverse customer base.

 Thank you for discussing your approach. The case can be concluded here.

Case Facts

• Overview- Cosmetic brand looking to open a store at an airport. 
• Positioning- US based premium cosmetic brand currently operating primarily in US and Canada with substantial market share.
• Objective- International expansion, conducting market testing and enhancing brand visibility.
• Problem- Choice of airport between Singapore Changi and London Gatwick