APAC transit retail

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Transit-oriented developments (TODs) are a fast-growing and lucrative trend throughout busy APAC cities, where expanding populations and limited space are putting increased pressure on the region’s urban sprawl.

TODs are centered around a transit station or within popular commuter corridors, allowing residents to work, shop, and socialise all in one community. Benefits include lowering pollution and traffic congestion while increasing the use of public transport and adding to the local economy. In addition, people are freed from the expense of owning a car, leaving them with more disposable income that can be spent, perhaps, at their local TOD.

“There is huge value in just the sheer quantity of people who pass through train stations,” said James Berry, director of transportation and infrastructure at architecture company Woods Bagot. “Airports have picked up on that already and have been able to secure revenue from those volumes of people.”

Up, Up, And Away

It’s little wonder why: Airlines in the Asia-Pacific region carry the largest number of passengers worldwide, and increasingly stringent security measures mean these “captive” travelers are also arriving hours ahead of their flight. Retail outlets are located between security and airline gates, featuring hundreds of designer brand outlets, relaxation treatments, restaurants, bars, and shops.

“Leisure travellers find themselves with time on their hands and in a holiday spirit,” Berry told CMO.com. “In that mindset, they’re more inclined to spend money. Airports take advantage of that and make millions–to the point where many airports make almost as much money out of retail than the transport system.”

Berry’s right. According to Generation research, global duty free and travel retail sales reached US$68.6 billion in 2017, with Asia Pacific leading the world with a 45% share of global sales.

Berry pointed to Changi Airport, where more than 62.2 million travellers pass through annually, as the epitome of excellence in transit-oriented design. “There’s no shortage of people looking after it and operating it. There’s plenty of space, it’s very clean, and there’s fabulous vegetation across the whole space,” Berry said. “And then, of course, everyone absolutely raves about the retail because it’s so expensive and luxurious.”

According to Ivan Tan, group senior vice president, corporate and marketing communications, at Changi Airport, the APAC region is currently the largest aviation market in the world, and that such growth brings about huge potential for the rest of the region.

“As the airport continues to grow its retail business, we constantly challenge ourselves to bring in new concepts and experiences for our passengers and visitors,” Tan told CMO.com. “This makes shopping here vibrant and exciting, ensuring that each journey through Changi is memorable and surprising.”

Non-aeronautical revenue contributes to half of Changi Airport’s total revenue and subsidises the aeronautical fees charged to airlines, he added.

Full Steam Ahead

Train stations are also working hard to tap into the traveller mindset, according to Woods Bagot’s Berry.

“There are significantly more people passing through rail stations than ever before,” said Berry, who is currently working on a multimillion-dollar upgrade for Sydney’s Central Station, featuring an expanded retail precinct. “Stations started to reinvent themselves as mixed-use developments over the last two decades, and we now have the commercial opportunity to refurbish and add substantial retail offerings.”

Urban infrastructure developments such as the new high-speed rail line between Kuala Lumpur and Singapore create more opportunities for transit-oriented retail, with developments customised to the unique requirements of the area. For example, stations are built multilevel, self-contained, and temperature-controlled due to the shortage of space and Singapore’s monsoonal climate, where thunderstorms regularly force large numbers of commuters to shelter in these developments.

Similarly, Hong Kong TOD Elements boasts 1 million square feet of retail space connecting four of the county’s busiest rail lines. Elements contains a 1,600-seat cinema, an ice-skating rink, and 123 retail outlets. In-station retail in Hong Kong generates approximately AU$359 million (US$264 million) annually, prompting developers to tailor projects to the preferences of consumers who prioritise convenience and proximity to transportation.

Details In The Data

According to Berry, the key to attracting customers to TODs is in the data. “If you can understand how the visibility and positioning of retail influences people, you can encourage people to buy more easily and frequently,” he said. “Digital analysis allows us to understand the flow of passengers and customers, so we can graph people’s sight lines and determine what the ‘sweet spot’ is that will be visible to the most people.”

In high-volume spaces like train stations, retailers are often more concerned with recognition and brand visibility than sales, Berry said. For instance, car manufacturer Ford has several concept stores in TODs.

Airports are also using the data provided by international flight arrival times to adjust their offerings and featured displays according to the nationality of the disembarking passengers.

“For example, when Japanese flights land, retailers change the window display to feature products that will specifically appeal to Japanese tourists,” Berry explained. “If you know that some groups will buy items that other nationalities aren’t interested in, then you can alter the offering based on incoming flights.”

The same could hold true at train stations, he added. “If you know there were certain groups coming through at certain times, you could target them in an even more direct way,” he said.

To capitalise on the popularity of online shopping, stations are trialling digital purchasing. In Korea, Tesco HomePlus has opened virtual grocery stores inside train stations where customers can choose products displayed on billboards on platforms. Each product has a QR code that can be scanned with a smartphone and added to an online shopping cart. After the transaction is complete, the goods are delivered on the same day. If the train arrives before customers are finished, they can continue shopping on their phones as they travel.

“In this instance, the train becomes just a portal for choosing, selecting, and paying for retail goods,” Berry said. “And, of course, offering goods in a way that takes up almost no space is incredibly valuable in underground station environments.”