The Moodie Davitt Interview: Retail inMotion targets a digital revolution

INTERNATIONAL. “We will engage with the passenger earlier, with more relevance and for longer during their journey.” That’s the simple but clear vision that inflight retail and technology specialist Retail inMotion has set for its role in the airline services market. It’s a market in which the company has big ambitions: from revenues of €20 million in 2011, the company had €165 million in 2017 across its Onboard Retail, Product and Technology divisions. And it plans to double this revenue figure in the next five years, according to CEO Stefan Patermann.

Stefan Patermann: “Our technology is built to enable the traveller to engage throughout the whole travel chain”

We meet at the company’s south Dublin offices, appropriately named Hangar 57, in March. The snows that accompanied the ‘Beast from the East’ storm are receding slowly outside, but inside there’s a crackle and energy about Retail inMotion headquarters. That’s no surprise: this is a young company, with 100-plus youthful tech developers at its Irish offices alongside members of the product development and retail teams. There’s a no-frills, stripped back look to the offices, though that also has something to do with the pace of expansion. Walls are being knocked, space created, seats and desks installed. Here, nothing stays still for long.

As Patermann notes, if you want to tap into the buying habits and needs of a new generation, you need to hire people from the same generation. “Airlines are looking at new ways to do onboard retail. They have new customers coming through, including Millennials who in the past were not on the radar screen of many companies. That is changing how airline retail will be done, including the products and services on offer. That also means we as a company need to adapt to these changes in our own culture, and attract the right people. If you act like a company in this market acted 30 years ago, you couldn’t attract the people to create great technology solutions or develop exciting, cool new products.”

Hangar 57: The fast-expanding headquarters of Retail inMotion in Dublin

Retail inMotion started life in Ireland in 2004, when Founder Dr. Joe Elias spotted an opportunity to develop a range of goods for the growing buy-onboard food and drinks market. In 2005, Ryanair was an early customer of its baggy drinks sachets, with Bullseye vodka one of its first brands. A year later the company struck a wider supply agreement with Ryanair, as it expanded its portfolio to food items such as Boxerchips.

Elias recognised the need for technology to connect orders, payments and fulfilment in the inflight services market. He developed the company’s in-house Vector technology platform in 2010, and then the company built its own EPOS handheld devices. A big breakthrough came when Retail inMotion won a tender to supply 35,000 of its Android-based EPOS devices to American Airlines in 2012.

Moodie Davitt snapshot: Retail inMotion
– Revenues 2017: €165 million (with a target to double this figure in five years)
– Sales transaction value through Vector platform 2017: US$1 billion
– Ownership: LSG Group
– Bases/Offices worldwide: 12
– Key partners (Product): Jet Airways, Norwegian, HK Express, AeroHandling Ukraine, Deutsche Bahn, Rail Gourmet
– Key partners (Onboard Retail): Aer Lingus, Eurowings, SunExpress, AirBaltic, Ryanair, Edelweiss, Spirit, Sky Airline, Viva Aerobus, Swiss, LATAM
– Key partners (Technology): American Airlines, TUI Group airlines, Icelandair, Lufthansa (Miles & More), Thomson Airways, Joon (Air France), Wow Air, Brussels Airlines, Stobart Air, Thomas Cook, Transavia, AirAsia, Hawaiian Airlines, JetairFly, Virgin Australia, Air Iceland Connect, Jet2.com
Source: The Moodie Davitt Report; RetailinMotion

That put the company firmly on the map, with LSG Group (previously LSG SkyChefs) among the first of the major inflight services players to take notice. The timing was just right: LSG lacked a fully developed onboard retail technology system and needed to build or acquire this expertise to meet its ambitions to become a global player. LSG and Retail inMotion created a joint venture in 2013, and a year later SunExpress awarded the company its first full onboard concession. In 2016 LSG Group bought the company, with Retail inMotion now a core division.

Building the customer base

In the past two years much has happened. The size of the Retail inMotion team has doubled, its customer base has more than tripled (to around 40, with 14 added in the past 12 months) and the value of sales handled through its Vector platform has now reached around US$1 billion a year.

Patermann says: “Onboard retail is a core competency for LSG Group. It wants to play a role in transforming the traditional onboard retail system. That will come about as more and more airlines move towards a hybrid model, where they have either partial or full buy-onboard. For LSG, it’s vital to have the skills and technology in-house to manage this.”

The transformation of the business can only come by taking a different view of airline and consumer needs, says Patermann, which is why Retail inMotion is structured into three divisions.

“We have moved on from the entrepreneurial start-up; once you reach a certain size you need structure. Two years ago we created three units: Onboard Retail (where we act as a concessionaire), Product (a wholesaler and logistics provider) and Technology. For each of these you need different skill sets, and even leadership. We have Managing Directors for each division, with me running the overall company. The three units make sense; they support each other but are independent.”

Crucially, each can align with the demands of airlines, whether they want to outsource all of their retail services, or they want to manage their programmes in-house but require tech support, for example.

Patermann says: “There is no one-size-fits-all. Each airline has a different passenger experience in mind. Many have decided that they want to do onboard retail themselves. For them we have bespoke solutions around technology, around product, around support services, whether that is crew training or brochure design.

“Other airlines don’t want to do their own onboard retail, they prefer to go for RFP and a fully outsourced concession package. That suits us too. All of our three business units support each other in any of these scenarios. Onboard Retail uses the great IT package we have and we use that division to test new concepts. Or the Product arm can support the other divisions too.”

The central vision noted above – to engage earlier, with more relevance and for longer – echoes through the solutions provided by each division.

How Retail inMotion describes its core strengths, from Products to Retail (click to enlarge)

Digitising the journey

“Engagement drives a lot of the enablers we have,” says Patermann. “For the last 30 years inflight service has just been a person walking down the aisle with a trolley, asking if you want a coffee or to buy duty free. Then they are gone again, probably having missed an ancillary revenue opportunity. You might have been asleep, you don’t have your wallet or there may have been other reasons. Our technology is built to enable the traveller to engage throughout the whole travel chain, to consume, to do e-commerce and so on. It also helps airlines meet the trend for buying onboard; today in Europe that is the ‘new normal’ on short and medium haul flights.

“We also talk about relevance: we offer a brand like Lavazza, which is great for people who know coffee. In the past it was just generic, instant, not very good coffee.

The retail specialist aims to engage with travellers for longer and in more relevant ways throughout their journey, with digital a vital tool

“We say we engage for longer: through technology, you can make many sales approaches, whether it’s pre-order delivered to my seat, or even to home. How useful is it for the crew to know who is sitting on that seat and what their purchasing history is? This is at the core of what we do. It’s about creating a different passenger experience, innovative products and overall making the experience an enjoyable one.”

Underpinning the Retail inMotion vision is the technology arm, led by Chief Information Officer Cian O’Cuinneagain. This area of the business will be a big contributor to its growth, by tapping into consumer data provided by airlines from the moment of booking and enabling greater passenger engagement.

Cian O’Cuinneagain: Creating “a more personal experience for the passenger”

Technology is at the heart of the ‘next gen’ end-to-end digital retail platform for airlines that the company announced in recent days. As reported, the platform features a new suite of modules, functionality and integration points that add to Retail inMotion’s existing onboard payment, back office and last-mile logistics management capabilities. Features include passenger and crew facing mobile apps, integration with inflight entertainment systems, flight schedule management, product and supplier management and pre- and post-ordering capabilities. Further moves to digitise consumer journey will be announced soon.

O’Cuinneagain says that more airlines recognise the need to share usable data with partners to grow the business. “You can create a more personal experience for the passenger. It’s no longer just about the trolley going up and down, it can be branded to the customer. We can tap into the airline’s data but need some of that data up front to contextualise the onboard experience.

“We find that airlines are by and large accepting of the need to share. Maybe not every detail but they realise you do need some data to build decent forward-looking projections of what customers might be likely to buy onboard. You have some airlines that understand it; with other potential clients it’s more of a demonstration where we’re saying we need access to more integrated information.”

“The connection to the consumer will be led by the airline, not Retail inMotion or another third party e-commerce player,” says Stefan Patermann

Patermann adds: “If we talk about IT, that connection to the consumer will be led by the airline, not Retail inMotion or another third party e-commerce player as lead partner. You cannot just establish yourself as a tech brand in this market – the airport or airline is the point of contact for the passenger.”

Towards a new model

That more airlines recognise the opportunity is encouraging, but is the current concession model a drawback?

Patermann says: “It is not easy to make money. But if I were an airline would I do things very differently? I’m not sure that the model will change quickly. The expectations of the airline for returns will remain high, but the concessionaires who drive the market will be those who deliver an additional USP to the airline and the passenger. It will be those who can maximise spend and additional returns for the airline.

We think real change will only kick in once airlines and airports start working together,” he adds. “I see it in very few places today and it is not done not very strategically. Everybody is doing their own thing. The airline won’t let the airport deliver to the plane; the airport won’t share a slice of the cake with the airline. The next big thing will be sharing revenues and profits.

“It won’t happen by the parties coming together and deciding to share for commercial gain. It will be driven by the way technology changes passengers’ lives in the future. Passengers will expect to be able to buy from the airline, airport shop or restaurant and have it delivered to the cabin. For them such services should be automatic. People will drive that through their demands and simply the way they live in the future.”

The travel chain begins pre-flight, continues through the journey and must include post-travel services; with increasing digitalisation, communicating with the traveller across these touchpoints represents a big opportunity, says Retail inMotion

Traveller demand will drive the evolution of services too, says the company. More and more airline companies have been dropping inflight duty free recently, but technology and the ability to fulfil services more efficiently (not simply by carrying goods onboard) might prompt them to rethink, says Patermann.

It’s a question of how you present the offer to the traveller. We have not seen many innovations in how sales and service have been delivered to the passenger in the past 30 or 40 years, but things will change. Pre-order and home delivery will have a bigger role in that business in future. Pre-order has been done in Scandinavia for many years, driven by tax advantages, though it hasn’t worked in many other markets. To make this model work well at scale you need ordering channels that fit today’s world, and fulfilment opportunities to ensure reduced delivery times.

“Great logistics can reduce those pre-ordering times. Today in some cases it can take days or weeks and who knows what they want to buy that far out from their flight? That’s what we do here: we ensure you can fulfil pre-order with a time of one hour before your flight and you’ll find the product on your seat. You can also browse something on departure on your smartphone, and then on your return trip it’s delivered to your seat. That is enabled through the technology already. This is still at the beginning, but we have customers who are integrating browse and pay together to make this happen.”

O’Cuinneagain adds: “Home delivery too is an opportunity. We have one client looking at this area closely. There are practical (duty free or duty paid) considerations as well as technology issues but it is possible.”

The company’s Vector platform offers airlines a suite of services (click to enlarge)

Marrying tech with tradition

Does the prospect of higher rates of pre-planning imply a fall-off in impulse purchases onboard? After all, the business was built on such purchases. Patermann insists that there will still be a role for traditional retailing, and for the crew in particular, but the technology will support them more than it does today.

“The technology allows the airlines to participate much more in planned purchasing by letting travellers know what they can buy in advance, by customising their pre-flight advertising. Once they are onboard the IFE system can advertise to passengers individually. The system will know you and can make customised adverts to the traveller. It’s not far away.”

O’Cuinneagain says: “We’re not forgetting about classic point of sale or the crew being a direct driver of ancillary revenues. That’s the bread and butter even if more and more people will engage through technology. It can still be staff-initiated often on the ground, at check-in or at the gate. It’s about connecting at more points even physically, not only through technology.

“It’s still a captive audience no matter how much connectivity improves. So whether it’s pre-planned or impulse, you can still develop an experience that is tailored to the consumer. With the technology advances you can transform the experience and generate growth in areas that are lagging. It also allows carriers to test new models. Whether full service legacy or LCCs, they can test new ideas. This is still a unique environment with opportunities that technology can deliver.”

The product offer, from food to retail, is being personalised and features branded items as well as in-house ranges

New points of contact with the consumer will present new opportunities and here Retail inMotion is determined to be ahead of the curve.

O’Cuinneagain says: “The next steps will be new touchpoints, whether that is Internet of things-based, voice activated bookings or on the ordering side, pre-order, delivery at seat or home delivery, as noted. Once you have that technological base, you can do so much more. You can enable frictionless payment, engage with product or F&B with a customised experience as we know who you are and where you’re sitting. It’s about making the process more seamless.

“All of that is in trial now, via Beacon engagement. At least we’re now seeing buy-in – airlines get more buy-in than airports at knowing and owning their customers. That’s positive and we can leverage that. Today airlines want bespoke relationships with their customers and that will help engagement in future.”

New products and new geographies

Product development and supply is the company’s other core area of activity. Here, it’s striking how Retail inMotion is seeking to tap into modern trends, such as healthy eating, and is trying to offer newness with both its in-house and branded offer.

Patermann says: “You used to see only classic products in say, confectionery. We create our own but I still see a big role for the brands. They create a connection for the consumer.

Retail inMotion’s own HQ is a testing ground for new products and new technology solutions

“But whether they are related to food or retail, brands must recognise the environment in which we work. We don’t have the same storage options as an airport. We are working to innovate to bring the brands’ own experience to life, and translate (not just replicate) that from High Street to airline. Exclusives are part of that. Many inflight programmes have the same items that you see in the ground shops. Our focus is on developing a branded offer that is only onboard one airline or only found in our programmes. Airlines expect this too. We will develop this area.”

The company aims to develop geographically too. From what was an Irish start-up and then a company with a strong focus on Europe (its biggest onboard retail client is Cologne-based Eurowings), the past two years have seen Retail inMotion spread its wings.

Eurowings is a major partner for Retail inMotion in Europe; now the inflight services company is spreading its expanding its network to new territories

It now has a presence on all continents, with 12 offices worldwide. Patermann says: “Last year we made North America a priority, especially on the tech side and with our American Airlines’ partnership. But that has progressed faster than expected [with recent contracts with Spirit Airlines and Viva Aerobus of Mexico –Ed], and we have Latin America (with LATAM and Sky Airline of Chile) too. We saw that Asia Pacific was an opportunity and we are now more active there. That will lead us to open an office in southeast Asia to manage key accounts.”

The growing network means that awareness of Retail inMotion among airlines has increased sharply. Patermann says: “If you had talked to airlines globally two years ago, some would not have known us. Today I’m confident that 90% of all airlines know who we are but also know what our capabilities are. We have presented to many of them and I think there are very few RFPS to which we are not invited today. In the past 18 months we have become more a global than a European company.”

From what is now a solid base of customers, the company is now well positioned to take advantage of the big opportunities that the inflight services market presents.

O’Cuinneagain says: “We have a product that is maturing. Now we want to bring all that transformative innovation to our customers as opposed to simply reacting to what customers ask for. We have a clear vision, want to bring it to market and drive adoption. That means facing challenges around data and integration on the tech side. That will be a key transformation in the market but we’re confident we can drive that in the future as market leader.”

Stefan Patermann: Aiming to double the size of the business within five years

Patermann says: “For us, it’s very important that our customers trust us. It’s important that we deliver what we promise. Sometimes start-ups focus on delivering fast, but not so much on quality. We have moved forward to delivering with quality. Our shareholder is a well-known, respected company and we cannot afford to be anything but a quality operator.

“Airlines today are looking to deliver a better passenger experience. This is the key: how is the passenger served, what is the product you bring onboard, what is your ability to fulfil on time and correctly? That is all part of the seamless, high-quality experience that passengers expect. The times of a bad sandwich and low quality are over. They want an experience that can match the High Street.

“That’s why we are set up as we are, with a strong focus on additional touchpoints through technology, something few others can do. We also have a strong understanding of the product that can fit into the culture of each airline, and staff who know retail well. Our culture is agile, innovative, friendly. These things make Retail inMotion different and will enable us to grow.

“We want our reputation to be that of an onboard retailer and an onboard retail technology firm with the highest quality and to expand from our base of 40 customers. If we achieve that, we can reach our goal of doubling revenues within five years.”

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