U.S. air travel has been forever changed by COVID-19. When post-pandemic travel ramps up, airports will be seeking to recover lost revenue while modernizing processes to deliver touchless experiences to travelers. So what can airports do to seamlessly adjust to this new normal and reinvent traditionally siloed operational models to meet constituent expectations? In this podcast, our panel of experts from Adobe, AOE, AWS, and Auckland Airport discuss how U.S. airports can rapidly convert legacy processes, personalize experiences and communications based on data, and deliver improved non-aeronautical revenue. Listen to this podcast to hear: • Current trends and recommendations to drive non-aeronautical revenue • Why distinctive, diverse, and digital experiences are imperative for airports to leverage • How airports can quickly move from offline to online, increase internal collaboration, and empower citizens and employees with digital transformation solutions • Auckland, Frankfurt, and London Heathrow airports’ modernization initiatives and lessons learned
How Airports Can Diversify with Digital Transformation
SPEAKERS
Kian Gould, Jane Wear, Phil Silver
Intro 00:14
On behalf of Adobe, AWS, AOE, and Carahsoft, we would like to welcome you to today's podcast focused on How Airports Can Diversify Revenue with Digital Transformation and reinvent the travelers experience post pandemic. During the session Kian Gould, CEO and founder of AOE Omnevo, Jane Wear, head of Omnichannel at Auckland Airport, Lee Horowitz, Commerce Specialist at Adobe, and Phil silver Transportation Leader at AWS, will discuss key modernization initiatives for airports and how to deliver improved non-aeronautical revenues.
Kian Gould 00:52
Thank you to everyone for joining us today. My name is Kian Gould, the Founder and CEO of AOE and Omnevo. I will talk today a little bit about what I call "what got us here won't get us there" and talking about how ancillary revenue generation for airports really has been affected now by COVID. And how, you know, we propose ways to get out of the situation through digital means. And I'm also very excited to have one of our dearest customers from Auckland Airport here with us, Jane, who has been working with us for many years now, and has been instrumental in driving innovation forward for their airport. And she will be sharing some very interesting insights as well, on how they have done that together with us. So, without further ado, I just want to give you a little bit of a background on our company. But of course, I will keep that very short, because today is about learning and about exchanging thoughts. And so AOE has been around since 2019. And we're about 300 people around the world in six different countries. We have in 2019, before also COVID hit the entire world in transportation market, we were powering more than half a billion dollars in revenue across our different airport and airline customers. And, you know, we have really put what we call non-aviation revenue digitalization at the core of our agenda.
Kian Gould 02:19
So, without further ado, I want to go into our topic a little bit and talk about, you know, from the point of setting the scene, where are we, at the moment, you know, of course, on the one hand, you could argue that it will not get worse from now, we have seen the biggest slump in the history of aviation, it's behind us. So, from now, passengers will grow again. But of course, it will take one two, maybe even three years to get back to previous numbers. And the bad side of all of that on top of limited numbers of passengers is of course, that you know there has been a lack of investment in some areas and significant lack of investment in digitalization and ecosystems at airports. Airports have for the longest time considered themselves more as buildings to move people and not so much as b2c organizations yet that actually have customers and that need to provide you know, full digital and physical services to these customers. So, that is kind of also hurting, now, of course, that you know, we know so little about many of these passengers coming through our airport. And the ugly of course is and this is what I will talk about today in a bit more detail is that really falling spent per passenger and the drop in conversion is to be expected across the entire travel ecosystem. Because a lot of the customer behavior has changed fundamentally across generations through a year of lockdown closed retail stores are very different, you know, relationship to ecommerce that we have all developed during this period. Even my mother started shopping online, which he never did before. And so, this has had a significant impact on how people will continue to use you know, airport retail airport, F&B and airport services.
Kian Gould 04:16
So the COVID impact of course, in the immediate term is very much less revenue. Tax numbers are down, you know, fears of infection will continue to dominate the debate. However long term, there are still significant impact to be felt even after we have passed the two year usual pandemic period as they say, once we have a significant amount of vaccinations, you know, what will persist this health fears there will be significantly less business travel that is the expectation from every organization out there. People have gotten too used to doing webinars and online meetings and they will fly less for business and of course, there is a significant risk of a long term disconnect with the channel of, you know, buying and shopping at an airport, as we have, you know, kind of realized that it's not a channel that we need to use, if we are stuck at home, we can use other channels. And so we need to reignite that channel, frankly, in order to get back to anything resembling the kind of retail and conversions that we have seen in the past.
Kian Gould 05:28
And of course, the impact on non-aeronautical revenues is significant across the board. It is quite frankly, possible and depends of course, on your location, then parking revenues will never recover to previous levels. And of course, the reason for that is that that services like Uber and others were already on the rise three COVID. And that rise has, of course, continued through these two years of, you know, a significant reduction in travel, but potentially, they will never recover to those levels. Because as we have been stuck at home, you know, there have been advances made in autonomous vehicles in in different areas. And so it is to be expected that, you know, in five to 10 years, and they will generally be less people taking their own cars to the airport per se. So, so this is also an area that goes, of course, beyond digitalization, where, you know, many airports and actually, Auckland Airport in New Zealand is one of them have constructed new parking structures in a way that they can be converted into office buildings at some stage when these parking structures might not be needed anymore. So this is something definitely to keep an eye on in the long term.
Kian Gould 06:43
Another significant impact, of course, is also happening on physical advertising as passenger numbers are depressed. Advertisers are significantly less interested in paying premium dollar for billboards at the airport. And generally there has been a tendency for brands to be a lot more interested in digital advertising because it can be more targeted, it is more relevant. And you know, it doesn't come at the same price tags per view, as very expensive billboard advertising within the airport.
Kian Gould 07:16
Kind of silver lining here is that F&B will most likely recover the first and many of you will probably have seen this already at your airport. People always need to eat people, you know are okay to do take away if there's no way to sit down. And so the impact on F&B will be not as significant. But of course, this will also take some time to recover. And lastly, and this is what we will talk a bit more about today is that we are pretty firm in our understanding that travel retail will never be the same. There has been a significant disruption to travel retail that has been ongoing for the last five to six years drop in spam propex across the board in most countries, except for some Asian countries.
Kian Gould 08:04
Disconnect with the channel, less interest in classic core categories like duty free liquor, tobacco, etc. And there are only some certain areas that have really been growing in travel retail. And so travel retail both physically and digitally, will need to be reinvented over the coming years.
Kian Gould 08:26
To give you an idea of how much shopping behavior has actually changed, just over the last year. Here's some data from the leading travel retail research company mind that we have found that 65% of all passengers say that they will significantly change their habits while traveling through an airport during the COVID period. And at the very top of that change in behavior is actually that they said they will spend more time their mobile tablet or laptop than engaging with the airport's services offering. So this is of course as significant impact on ancillary revenues that is to be seen here. So as people spend more time on their devices and less time engaging with the airport, of course, this will have a significant impact. And the same will be about interest, you know, avoiding interaction with other passengers but also with store assistance. And 44%, in fact, have said that they will spend less time shopping. And of course, that is not very good news for you know, the very vital retail income that all of you as airport operators have. So how do we, how do we see this playing out and this is some very interesting data that has been released recently. That shows that you know, just in May 2020 alone, online sales grew by more than 195% and the total online spending has hit more than 82.5 billion now, and is up 77% in a year over year period, department stores are expected to decline by over 60% for the full year.
Kian Gould 10:10
And you know, we have all seen in what dire situations they were pre COVID, so many of them might not be able to return. And so more closures of department stores and malls are absolutely imminent post COVID. And even propped up government loans cannot change that trend in the long term. And, of course, you know, ecommerce is projected to grow by nearly 20% in 2020 alone. And what that means, in summary, essentially, is that, you know, the already continuous and fast growth in ecommerce that was expected to happen over the next five to 10 years, actually have been all squeezed and accelerated within just the first four months of COVID. And how much of that is the long term of tech, of course, remains to be seen. But I believe it will be futile to think that things will simply go back to normal because customer behavior has changed significantly in that period. So when thinking about what can we do as an airport, you know, I would like to separate this into two different areas. One is, what can I as an airport operator do alone? And what do I need others to help with.
Kian Gould 11:19
And the first thing is really, mainly a mindset thing, as an airport operator, you have to stop thinking like a landlord, and actually start thinking like a customer experience company, both offline and online. And of course, that entails a lot of things. Don't think about concessions and just renting out space, and having a certain amount of text volumes going through your airport, and you need to handle them the most efficiently. But actually think more as, like an airline does and say, I'm transporting people, but that's not where I'm making the money. I need to actually make the money on converting these customers into, you know, shoppers, consumers, and people can, you know, utilizing my services, that also means that a lot of the investment that has been planned over the next years, you know, and we're talking billions and billions, obviously, if you just look at an airport development, like JFK, for example, talking about double digit billions in infrastructure investment, just take, you know, less than 1% of that, and start thinking about how can I invest in better customer experience digitally, because that is what ultimately people will care a lot more of down the line than how beautiful the buildings are.
Kian Gould 12:38
This, this means that you need to start by creating a digital foundation for customer acquisition, retention and digital sales. And that, of course, then means that really, you're starting to put yourself in the position to capture customer data, to utilize customer data, and then to use that customer data to convert it. Because one of the main difficulties for airports that I'm sure you're all aware of, is that you don't naturally have customer data, which is very different from an airline who has a loyalty program and who sees the booking data of their passengers. And to have a large portion of passengers also book on their actual airport or check in on their airline website, as an airport, you need to put in the work to actually start gathering and capturing that data. And of course, there are many ways to go about this. Additionally, you know, airports have limited space limited capacity to add more stores. So in order to extend that footprint of retail concessions, you can start thinking about how to partner with downtown stores. And this is something that Jane will also talk about, because Auckland Airport has done an incredible job in you know, integrating with more than 300 downtown retailers, many of them luxury in order to actually you know, benefit from people shopping through these stores and creating additional revenue streams for the airport as well. And Heathrow is another airport that is going into this direction, with luxury brands and downtown in a very strong way as well.
Kian Gould 14:17
Additionally, of course, it also means that, you know, to think outside of the box, think less about being an airport and think more about, you know, what other things can I do that actually have little to do with being an airport and think about how can I be, you know, a logistics company providing customer service experience to customers. And there are a lot of possibilities in that area as well. And we will see a little bit more of that from Jane as well. But the real impact once you have gotten the basic rights and have created this foundation for engaging your customers digitally, the real impact happens when you start partnering and what that means is that what really is necessary in our travel and in our travel retail and aviation world is to reinvent this fundamental paradigm of airports being a separate entity from concessionaires, from retailers, from airlines from brands, and really think more in collaboration versus competition, how can we combine the best aspects of each of these players, the access to the customer, the access to data, the access to product, the access to facilities and infrastructure, and really create this, what we call the new extraordinary, and not just the new normal. And one of the big pieces in that is to tap into an incredible ecosystem that is worth more than 100 billion dollars of loyalty points floating out there from all of the airlines that are flying in and out of your airports that, frankly, have quite some issue. They have their customers burn these loyalty points on valuable flights and upgrades right now, because of the implications of COVID. And that are looking for ways to use these loyalty points elsewhere. And of course, part of that is “how can I start using these loyalty points for purchases at my airport”, because it is ultimately a currency that is out there that is unused that passengers are, you know, not used to using at the airport, because they haven't had the possibility for that before. But through digital means, is actually a very seamless and logical next step.
Kian Gould 16:33
And that also means making the airline and the airport experience more of a digital seamless experience, by integrating the airport services seamlessly into the airline's services, whether it's on checking whether it's on booking flow, or whether it's even in the in-flight entertainment system. And so far, very few have made major steps in that direction, they have been pilots. But you know, it takes a lot more than these pilots to have a significant impact on recovering these very important revenues. And part of this, of course, is also that you need to be able to create what is called typically in the industry as the single customer view. In order to understand what your passengers want, you need to have digital records on them, you need to see what they're interested in purchasing, what their travel habits are, and so on. So, CRM is definitely at the core of starting any kind of digitalization initiatives, you cannot start loyalty, you cannot start ecommerce, you cannot start any of these things without having the basics that you can actually capture and convert passengers. And so capturing all the data that you already have. And finding ways to capture better data is definitely at the core of any digitalization strategy for an airport.
Kian Gould 17:55
And what it also means is that airports need to get into this understanding that they have never had before, which is that you have to pay for traffic. You know, you're not used to paying for people to come to your airport, which you know, a mall is always has to do, but an airport doesn't. But when it comes to digital traffic, it also means that you need to pay marketing dollar in order to capture the audience's before they come to your airport in order to maximize on the conversion potential, because the conversion potential while at the airport is significantly lower digitally than pre-flight.
Kian Gould 18:32
And what that also means is that once you reach the state that you have the ability to communicate to your passengers because you have started building profiles on them. You can use very fancy and, and advanced techniques, by using geo targeting together with for example, the Facebook API's in order to actually target passengers in their Facebook feed while they're at the airport actually being distracted from what you could be offering to them. And then get, you know, services and offerings actually matching their current position and their current potential interest based on this integrated geo-IP base, you know, marketing campaigns, these are things that almost no airport in the world is really doing meaningfully. Yes, we have done some trials, but it is still a very, very large consumption. So what I want to show you is what doing many of the things that I have just mentioned, has meant to you know, one of our most successful airport customers that we have held for the last years in building, you know, probably one of the biggest benchmark in in customer engagement and digitalization of any airport in the world. And that is obviously Heathrow and I just want to share with you a few benchmarks that you know we have managed to achieve over the last year before COVID
Kian Gould 20:00
And the most impressive one is that Heathrow Airport is an airport that has one best shopping airport in the world 10 years in a row. And so they have actually said even in their financial statements recently, that all the growth in spend per pack are is attributed 100%, to their ability to convert passengers digitally, because all the neighboring airports have seen banned per passenger drop. And we have reached a point in 2019 that actually 20% of all purchases are digitally influenced at the airport, the total economic and when I say economic impact, I mean, incremental impact is estimated to be about 70 million additional dollars in revenue for the airport. And the average basket value is 500% larger in our online shopping experience than it is in the physical stores. And Heathrow, which is my favorite statistic actually sold around one Swiss watch every 15 minutes at the airport, most of them pre ordered or research on our online platform beforehand. And when you look at the revenue distribution of the digital sales that they are for, you can see that a lot of it is actually driven by categories such as high end electronics, luxury watches, passion, and not anymore about the duty free categories. That you know, in the past were the core focus, because customers have identified airports as cost efficient ways to buy high value items at a lower cost, potentially tax free or duty free when they're traveling internationally. And so this is one of the core areas to capitalize on digitally, in this industry. So, in a nutshell, what we offer as a company is a solution that we call Omnevo stands for Omnichannel evolve. And it is the only end to end integrated solution for airports to really digitalize the entire non-aviation revenue potential, whether it's pre order pre select lounge, selling, parking, booking ecommerce marketplace, selling airport VIP services, offering Fast Track doing seamless earn and burn with loyalty points across the entire ecosystem on the airport fulfillment, etc. And you know, whereas in the past, there have been many little niche providers, whether it's grab or at my gate, etc., that have offered a solution to something that is not really a problem, to be honest.
Kian Gould 22:46
You know, we have taken an approach to creating a completely integrated from customer acquisition, to sales to retention, that truly manages to increase the spend per pack. And not just provide, you know, a nice service that that, you know, one out of 10 customers might use, but something that actually adds to the entire customer satisfaction, you know, customer retention score.
Kian Gould 23:14
And so our message here is, you know, we need to start breaking the silos. Think about it as one platform one experience. And that's it for me for today I will pass on to our dear customer Jane, who will talk a little bit about you know how Auckland Airport has managed to, from our point of view be become the most digitally advanced airport in Asia Pacific. And you know how that journey has been for them. Thank you very much. And I'm looking forward to your questions. After we're done with the presentation part of this.
Jane Wear 23:48
Thank you, Kian, and to Carahsoft, Adobe, and AWS for the opportunity to share Auckland Airports story of digital transformation. Today I would like to share with you all, our approach to transformation, our journey to Omnichannel, how we've chosen to respond and mid COVID and some thoughts on what we see as important principles that have guided us. Let me start by sharing a few insights into our operations at Auckland Airport in 2019. We are the third busiest International Airport in Australasia and have been working on our transformation into Australia's most digital gateway. In the year to June 2019, the total number of passengers passing through our terminals was 21.1 million. With 11 and a half million international passengers and 9.6 million domestic passengers. We have 30 Airlines arriving and departing serving 48 international destinations
Jane Wear 24:41
and 22 domestic destinations with 178,000 flights annually. 75% of all international visitors to New Zealand pass through Auckland Airport and we had 93% of shear of all long haul arrivals. Terminal based retail operations have the highest footfall of any retail operator in New Zealand with retail sales growing at a rate two times faster than the high street of comparative shopping malls in Auckland.
Jane Wear 25:07
Our objective is to understand who our customers are and make their experience of shopping at the airport easier. We want to empower them to research duty free and tax free retail proposition well in advance of their travel and then choose to shop anywhere anytime as they choose.
Jane Wear 25:25
Taking care of our customers is very important to us. Like many airports Auckland Airport is a complex and internet interconnected ecosystem, which relies on many partners within the airport to work with us to deliver a great experience for our customers. We realize we have a critical role as the custodian of the total customer experience and have chosen to invest in our physical channels. And more recently, in the last five years in our digital channels to improve our capability ensure that each part of the airport experience meet the dictation. Our customers continue looking for greater flexibility to control and to plan and manage their journey. They engage with us and our partners by multiple touchpoints. And we see the need for greater convergence between the two to be able to deliver a more seamless and integrated experience. Our digital transformation and journey to Omnichannel started with the coming to life of our retail proposition best of New Zealand in the world, incorporating 180 million development of the airport, international departure lounge and a full redevelopment of the year side retail to purchase experience. We immediately saw an opportunity to leverage the investment we've made in the physical environment and be able to showcase this digitally to travelers prior to visiting the airport.
Jane Wear 26:34
During 2017, the airport began its investment and strengthening its relationships with frequent travelers through the airport with the launch of its digital rewards and recognition program strata club and with the creation of a single sign in account across our multiple airport services. During late 2017, we've partnered with a way to build the first phase of a new Omnichannel capability to align our new retail offering in the international terminal with a digital retail ecommerce marketplace and our fulfillment operation. This was an ambitious program of work however, has provided us an ability to extend the retail strategy from the on terminal physical retail to online reaching and an off airport retail proposition. In doing so we now have the underlying technology platform in place to be able to cater for different traveler segments with different propositions.
Jane Wear 27:21
The concept of edge was new to Auckland Airport and we were one of the first airports to start innovating in the Omnichannel space or our multi retailer ecommerce marketplace we adopt a launch and learn approach narrowing our initial focus to a customer segment where we had a good understanding of their behaviors. We challenged ourselves to see how we could bring value to their journey and shopping experience at the airport, which is a concept with frequent travelers and realized it early on the inexperienced need to be on par with a local and international online destinations they would typically shop it the integration of payment and full on airport fulfillment to deliver end to end ecommerce was critical for us. We collaborated with our retail partners to design the experience the proposition in supporting operating model and processes. He brought specialist expertise having developed Omnichannel capabilities with other airports internationally, we lead with a mobile first UX UI design and adopted an iterative agile model for the delivery of the solutions.
Jane Wear 28:16
In late June 2018. We launched a minimum viable product invited a subset of our customers to experience it and shop for the upcoming journey. This gave us some valuable insights or where we needed to improve and also how best to support our retail partners and our call center operations. We've now completed the third release of our product is we refining extend capability in line with our customer insights. We saw our core point of differentiation has been to keep everything simple from a customer's perspective was dealing with a complete to be in the background. This means for the customer, a single identity one online destination to explore and shop duty and tax free one checkout experience in one convenient pickup location. By early 2019. We had therefore two new digitally supported propositions well positioned for growth. A collection point is a service utilized by international travelers who purchase duty and tax free goods from downtown stores and then are able to collect those items as they depart International Airport. The mall is our ecommerce marketplace and allows international travelers to shop across different retailers select items and purchase or pay at any stage of the travel journey using their own mobile devices. Before the outbreak of COVID-19. Both are more than a collection point had been growing strongly and faster than all our predictions and the customer feedback scores were getting suggested was really resonating with travelers. Frequent travelers who knew what they wanted to purchase duty and tax free could order it in advance before travel and have it ready to collect prior to departure or tune. The past 12 months has been the most challenging in the airports 54 year history is for everyone. The COVID 19 pandemic has been hugely disruptive. Currently our border remains close to everyone except New Zealand citizens and residents which has been tough on our retailers focused on the international travel market.
Jane Wear 29:58
We have seen a dramatic change in passenger volumes international has been down 95% on this time last year and continues to track at this level. The domestic left this is now back to about 70% on this time last year, there is no doubt the growth of online and greater familiarization with clicking collective home delivery services has been turbocharged by COVID-19. Accelerating 10 years ahead, it would have been had there not been periods of lockdown of the population. We were aware categories of the airport had previously held strong representation and experienced significant growth domestically online, people were locked out from purchasing with retailers at the airport. The significant reduction in passenger volumes has fundamentally changed our operating dynamics international business was restricted to servicing, repatriation and cargo flights and the flow on effect to our transport and retail business activities. But significant became abundantly clear we need to address the rebound and domestic treble volumes we did have and have Panis the tuber chat shift to online to enhance that you would experience and benefit at your port retailers. We already had the digital infrastructure in place, so it was about ensuring we meet customer's expectations in the online space and support our retailers make the most of the opportunity. We saw the opportunity to extend our digital retail offering to the domestic terminal, which had historically been restricted from a broader retail offering from physical space constraints, and now capital constraints. It meant we could support our airport retailers to monetize the passenger flow we were seeing through the domestic terminal. And during 2020 we surveyed frequent domestic travelers and asked them how safe they were feeling about domestic travel and how we could bring more value to their airport experience. They responded with "bring me an international type shopping experience when I'm traveling domestically, make it contactless so I don't have to touch anything." We started discussing with our retailers, some of which had never traded in the domestic market before only having retail locations in the international terminal. They understood the opportunities; they connected with their customers who are now shopping elsewhere. While there is a limit of international travel, and we built a greater understanding of the operational and commercial constraints. What followed was a very fast three months to bring our thinking to life and we launched a new online shopping experience, which extends beyond an online duty and tax free shopping experience for international travelers to an online duty and tax paid shopping experience for domestic travelers, both for a click and collect service.
Jane Wear 32:16
We know travelers associate the experience of airport shopping with the excitement of upcoming travel and allows them to be able to continue to enjoy this even though they're not currently able to travel internationally. This ability to fold tube can complimentary but distinct shopping propositions within one single on the online channel. We believe positions are strongly for how we can continue to engage and be relevant to our consumers and evolve our retail proposition in the future. Our goal has always been to present simple and seamless shopping experience to the traveler whilst we and our retail partners manage all the complexity in the background.
Jane Wear 32:50
Our initial trading insights are--we've seen a similar degree of resonance to the core category shopped in our international experience, we've seen greater volume buying given the normal international travel allowance restrictions do not apply. And we've seen higher mix baskets and average order values than weight.
Jane Wear 33:08
Finally, it's important to acknowledge and driving towards digital transformation in Omnichannel in the airport environment there are a number of key principles that guide success. From my perspective, it starts with alignment and being very consumer lead and you're thinking having alignment on objectives and business outcomes cross your partner's flexibility to test learn and bring new ideas propositions quickly to market. Having clearly defined operating models and collaboration for the end to end customer experience, strong communication, agility and decision making in delivery, and constant measurement refinement in celebration of success. And now I'm going to hand it off to Phil Silver, State and Local Government Transportation Leader at AWS to discuss the importance of a cloud based strategy. Phil, over to you.
Phil Silver 33:54
Thank you very much, Jane. Hello, my name is Phil Silver, and I'd like to thank Carahsoft Adobe and AOE for the opportunity to speak today. I really enjoyed hearing Jane speak about how Auckland Airport is innovating the passenger experience with Omnevo on AWS. I lead the State and Local Government Transportation vertical practice at Amazon Web Services, also known as AWS. It's great to be here and to spend a few minutes with you today. In the transportation sector, AWS's goal is to support the agencies tasked with moving people or things safely, efficiently, economically and equitably. Working with customers and partners who recognize that the power of cloud computing is key to their future.
Phil Silver 34:41
At AWS. This relates to our engagements with Departments of Transportation, traffic authorities, tollways public transit seaport, municipal and Regional Planning, organization, and of course, airports. All of these transportation modes, operators, and regulators are key stakeholders in the future of mobility and transportation, and all face the challenges of modernization, resiliency and cost savings. Even as our transportation networks recover from the impacts of the COVID19 pandemic, the pandemic has been a wake-up call for the type of disruption to the travel and hospitality industry that no one predicted. At AWS. Our interest is to support amazing technologies that partners like HP, Adobe and Kara soft make available in order to accelerate the recovery of airports and help them use this opportunity to modernize the way they can provide exceptional travel experiences in ways that could not have been imagined five or 10 years ago. They are in a community of 1000s of AWS partners, who are building on AWS across practically every industry sector. One of the ways we do this is by helping innovators to focus on innovating faster. By using their highly valuable IT resources on developing applications that differentiate their business and transform customer experience. Instead of the undifferentiated heavy lifting of managing infrastructure and data centers.
Phil Silver 36:17
Customers are choosing AWS over other providers, because it has a lot more functionality, the largest and vibrant community of customers and partners, and the most proven operational and security expertise, and is innovating at faster velocity, especially in new areas such as machine learning and artificial intelligence, Internet of Things and server-less computing. All of the participants on this panel are leveraging these capabilities to innovate for you.
Phil Silver 36:48
So what are the cloud best practices, AWS partners like HP and Adobe take advantage of to deliver their customers’ exceptional experience? Let me highlight just a few. They enable scalability, automating your environment using disposable resources, loosely coupled components. They design services, not servers, they choose the right database solutions, and they build solutions that avoid single points of failure. They're also able to optimize for costs. Use caching to deliver a fast experience from wherever your customers login from, and they work to secure your entire infrastructure. The presenters that you heard from today incorporate these practices into their AWS platforms, allowing them to innovate rapidly and pass these benefits along to their customers because they are agile, and can quickly spin up resources as they need them, deploying hundreds or even 1000s of servers in minutes. This means that they can very quickly develop and roll out new applications, and development teams can experiment and innovate more quickly and frequently. They save on cost. With AWS capital expense is traded for variable expense, and charges are only incurred as it is consumed. Leveraging AWS is economies of scale, Dow Jones, for example, has estimated a global infrastructure savings of $100 million. This is significant in times where capital investments are difficult to make. They only provision what they need, and don't have to over-provision to ensure that they have enough capacity to handle the business operations at the peak of activity. AWS manages and maintains the technology infrastructure in a secure environment. That means they only provision and pay for the amount of resources that they actually need, knowing they can instantly scale up or down along with the needs of their business, which also reduces costs and improves their ability to meet users’ demands. Finally, they breathe innovation, and as stated earlier, are able to innovate faster because they can focus precious IT resources on differentiation, long term planning and transforming customer experiences. Instead of managing the upkeep, maintenance upgrades and refreshes to on premises architecture and data centers. What does this mean for you?
Phil Silver 39:23
Here's a quote from David Sullivan, CEO of Elizabeth river crossings, who has said that "modernizing its legacy infrastructure allowed ERC to avoid a costly hardware refresh, improve its resiliency and business continuity capabilities and enable it to better serve the 1000s of drivers who travel its roads and tunnels daily."
Marissa Panchal 39:45
Thank you very much, Marissa, over to you. Wonderful. Thank you so much, Phil. Great. Well, it looks like we do have some time for some questions. So I have seen a few come through, and it looks like this first one is kind of based off of your presentation, Phil. So, why is a cloud strategy an important first step in airport innovation?
Phil Silver 40:08
Thank you for asking that question. A cloud strategy is important because it enables capabilities, frankly, that weren't on the table five or 10 years ago, an airport, for example, really lived within its own environment, it was able to function with its own on premise databases, because the systems that connected the airport to its passengers all lived in the airport, that's changed. Now, as you can see from Omnevo, where a passenger is going to be connected to the airport, perhaps long before they get there. We are starting to see that as well in how passengers are screened before they get to the airport. A cloud strategy enables communications widely, securely, quickly. And it also allows for the kind of innovation that you've seen today in in Omnevo.
Marissa Panchal 41:00
Wonderful, thank you so much. The next question we have here is more related to e commerce. So how should an airport set up their internal organization to enable it for digital ecommerce?
Kian Gould 41:13
Jane, you want to go first?
Jane Wear 41:14
Okay, I'll go first. And from my perspective, it's about setting up a dedicated project team. It's a mix of Business, Business, technical, operational, people that can be 100% focused on the program. The challenge is, we all we're all very busy, and we all have lots of lots of kind of responsibilities, but you really need a dedicated team, I would recommend specialist support, particularly if the organization has not taken on a digital transformation before. And for that team to have a really clear vision and a path to delivery.
Kian Gould 41:46
And from our point of view, having done this with many airports, it does help to have this kind of organization be as autonomous as possible, because, you know, many airports tend to operate in silos, and that can really slow down progress. So it's, it's quite vital that you know, you have a team that is empowered to make decisions. And that doesn't need to constantly check back with every single operational business unit if they're allowed to do what they're doing, and so on, because that can significantly delay progress.
Marissa Panchal 42:19
Awesome, thank you both. The next question we have here, and it's probably for both Jane and Ken, is airport e commerce extra sales, or the same sales moving over because of COVID? In hygiene concerns?
Jane Wear 42:34
Okay, so what we've seen is pre COVID times, obviously, it's incremental sales. So the target is always to build incremental sales for the retailers and reach audiences that they otherwise couldn't be reaching themselves. Obviously, through COVID, international experience has not been operating. So we've had a new domestic experience. This is something that's completely new to the import from an online space. So these are, you know, purely new sales that have been generated for the retailer.
Kian Gould 43:02
Yeah, and as you saw in my KPIs from Heathrow as well, I can, I can second that, that, in general, that has been an increase in spent per pack. And now the cannibalization of existing sales, because essentially, it's a very different shopping behavior. It's planned versus impulse. And ecommerce targets the plan, which tends to be the higher percentage nowadays, it's about 75% to 25%, according to recent data and travel retail, whereas impulse only targets those that are already at the airport. So it's not actually the same sales funnel, typically.
Marissa Panchal 43:39
Perfect. Great. And then in terms of retailers, why do retailers collect and click propositions, not deliver?
Kian Gould 43:49
Yeah, I would say we've seen this across many, many airports that we've worked with, and that the main duty free retailer, you know, whether that's DFS, or, or do free or whatever, when they bring up their own e commerce pre order solution, the main problem is that you as a passenger, you don't necessarily know who the retailer is at the airport. So you're not going to go to the website of the retailer that you don't know exist. So it is very, it very much comes down to a marketing problem. The retailer is not the brand, they have purchased the brand, actually the biggest brands the airline to be fair, but you know that the retailer is definitely the lowest brand from a customer point of view. So that is why we always recommend to include the offerings of the retailers, obviously, all of them, but not to just direct to the to the retailers pre-order side. And I think Jane, you can probably mention, since you had a pre-order side of the retailer before what the change has been in regards to the customer acquisition possibilities
Jane Wear 44:53
Yeah, I agree with what Kian said there's really real value for the retailer and being part of a wider airport proposition. They can utilize both the scale of the airport marketing and communication channels but also benefit from customers coming looking for different products across different categories. So although the single channel, retailer ecommerce, clicking clicked, install operate and can still be successful, is certainly scale benefits of being part of any former.
Kian Gould 45:24
Yeah, and one thing that's quite crucial to keep in mind there is an airport concessionaires change. So if your retailer has been collecting all the customer data for five years, and then another concessioner wins the data, you have to start from scratch that you should never be in that situation as an airport retailer, because data is way more valuable than the actual sales in the long run.
Marissa Panchal 45:47
Perfect. Thank you both. Looks like we have time for a few more. I think this might be our last one. So you all talked about partnership and collaboration. So how can competing companies and market players like airports, airlines, brands and retailers become partners?
Marissa Panchal 46:06
So I'll answer from my perspective: Collaboration is a huge part of this journey, this journey in digital transformation. And from my perspective, it's about having core objectives and business outcomes that demonstrate value to each of the different stakeholders. And we worked through that very clearly with our partners to ensure what we were delivering and what we're all spending our effort on, was actually going to create real value, of course, you want to create real value for customers first. But you know, you need to get to a win-win proposition for each of the different disciplines.
Kian Gould 46:39
Yeah, I think from my point of view, there has been a lot of arguments over fighting over the same pie, the short sort of, you know, share of wallet of the customer. And in the past, especially airlines and airports have tried to fight over that, especially if they both had retail offering. But the reality is the pie has gone smaller through that approach continuously gotten smaller. And if we want to actually increase the pie collaboration is the only way to do it, and then it will increase for everybody.
Marissa Panchal 47:08
Perfect. Thank you both so much for your insight there. Great. Well, unfortunately, it looks like we're all out of time for today's webinar. I want to thank our participants as well as our speakers, Kian, Jane and Phil for being with us today. We hope this webinar has been helpful to you and your organization.
Outro 47:27
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