Airport Deliveries

How we shop and dine at the airport is about to change for the better

December, 2020

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Revenue, Costs and Margins

Revenue and Margins

Most of the Airport Delivery and Digitisation companies are still operating in the red with negative gross profit margins. These new business models are relatively new and negative profits in the beginning are expected as companies are looking to capture market share. At the end of 2019 some companies were getting close to break-even, but then Covid-19 negatively impacted the travel industry and revenues fell.
 

There are some secondary revenue opportunities for Airport Delivery and Digitisation companies such as marketing and sampling sponsorship opportunities.


Costs

There are 3 distinct types of companies looking to digitise the airport space:

  • food and beverage, at gate deliveries

  • retail shopping delivery and pickup 

  • B2B retail platforms

Costs differ depending on the type of company. Food and beverage at gate delivery companies incur relatively high fixed costs in terms of labour costs (delivery services). Labour costs differ from company to company, but usually they are the highest cost as a percentage of revenue - in the range of 400% - 600%. Retail shopping delivery and pickup companies could have very high fixed costs if the business model involves storing the products at the airport as retail space at the airport is often pricey. B2B retail platforms (e.g. in-cabin retail shopping platforms) intuitively have low fixed and variable costs. Major costs for those kind of companies are software development and business development.

All companies, except B2B retail platforms, have significant customer acquisition costs currently in the range 2x - 3x revenue.

Investments

Investments in airport delivery companies continue to grow as the new business model matures and proves successful. Covid-19 naturally has hindered investment in the industry, pushing some companies to crowdfund.

Figure 1: Investments in Airport Delivery and Digitisation companies

Airport Deliveries and Fullfilment Innov

Notes: The Parrot collects information from a variety of sources. The chart is based on public data for tracked companies for the period 2016-2020. Last updated Nov 2020.

The New Business Model

Newcomers aim to challenge the "offline" airport environment and meet underserved customer needs. The new type of service is looking to solve customer pain points like having to plan ahead, arrive early or face a limited choice of option based on what is available at the gate. The new business model provides time-pressed travellers, airline crews and airport staff with the opportunity to pre-order retail products or order food and beverages directly at their gate. Airport delivery providers would usually charge a fee in the range or $3-$5 / €3-€5. The proposition is also highly attractive for retailers and restaurants looking for additional revenue streams.

These new types of services could prove to be very beneficial for airports too. As airports are seeing a decreasing or plateauing trend for non-aeronautical revenues due to the rise of ride-hailing apps (decreasing car parking revenue) & online shopping (decreasing retail spend), digital airport delivery services could prove to be the silver bullet. Covid-19 is also pushing the industry to innovate given the need for social distancing.

The size of the opportunity for airport delivery companies is substantial, taking into consideration all occasions - tens of millions of travellers, airport staff and flight crews. According to a survey conducted worldwide by Statista in 2019, the ability to pre-order items on mobile and pick them without having to wait in line would entice 37% of respondents to spend more money in shops and restaurants at the airport.

Risks

In-house development

Airports are seeing plateauing or decreasing secondary revenues due to online shopping and ride-hailing app services. Airports therefore could decide to enhance their digital services in-house to increase revenue.

Major Duty-free operators

Major Duty-free operators (such as Dufry) have already developed pre-order services in leading airports. Other airports and duty-free operators could decide to do the same reducing gaining market share.

Changes in travel

Currently, Covid-19 is negatively impacting travel and with it retail spend of travellers. Startup companies' survival would depend on the rate and shape of recovery (whether it would be an V-shaped, L-shaped or Tick-shaped recovery), government travel restrictions and appetite for travel. For the moment most companies are in a “wait-and-see” situation.

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Industry Overview

With recent technological innovations many aspects of everyday life have changed. The retail and food and beverage environment at the airport hasn't evolved much. The lighting at the shops is brighter, the ads are shinier and more polished, but the overall experience has not changed much since the 1970s. In a digital-first world, travellers are craving convenience, efficiency and personalised seamless experiences on the go. Shopping and dinning at the airport are mostly offline experiences with customers unable to compare prices on their devices and browse the whole inventory while they are on the go (travelling to the airport, waiting for a shuttle, etc.).
 

Generally, airport revenue comes from two primary streams - aeronautical (fees paid from aircraft operators and passengers for airport facilities and services) and non-aeronautical (retail concessions, car parking, property rent and others). Non-aeronautical revenue comprises mostly of retail & restaurant concessions and parking and is a key contributor to the profitability of airports - usually in the range of 35% to 55% depending on the airport. As non-aeronautical revenue is negatively impacted by development of ride-hailing services (shrinking parking revenues) and the abundance of digital retail shopping (decreasing concession revenues), airports are looking for ways to reverse the trend.

Customers, Suppliers and Partners
Customers: travellers, airline crews and airport staff
Suppliers: airport restaurants, coffee shops, retailers and duty free operators
Partners: some companies have decided to partner so they can cover larger amount of airports - AtYourGate and Grab
 
Companies

Insight Parrot explores thousands of data points and is on the lookout for trends that shape the forward curve of your industry to help you navigate the ever changing travel landscape and harness the potential of unfolding opportunities.

Reviewed companies in this analysis:

| Airbuy | Airfree | AtYourGate | Bonflite | Fetchy Fox | Grab | iCoupon | Inflyter | MyDutyFree | SkyBuys |

The Parrot collects information from a variety of sources. If you want to tell us about a new company, notice anything missing or any errors, please get in touch.

Airbuy

Description

A B2B engagement platform

Coverage

India (Delhi Duty Free and SpiceJet)

Founded

2017 in Pittsburgh, USA by Jasjit Makol

Number of Employees

5

Funding

Backed by Incubate Fund MIT and CMU

SWOT

Strengths
- Regional knowledge with 2 regional clients/partners

Weaknesses
- Limited coverage
- Although the company is founded in the US it seems that it is struggling to find business in the US

Opportunities
- Grow internationally

Threats
- Competitive threats
- The product can become redundant as some companies could opt-out to develop similar capabilities in-house
- Decrease in travel and in turn profitability due to Covid-19

Airfree

Description

SaaS platform, connecting travellers to duty-free retailers and travel-related service providers worldwide. The platform enables purchases mid-air by utilising aircraft's wifi.

Coverage

N/A

Founded

2016 in Paris, France by Etienne de Verdelhan and Agnès Debains

Number of Employees

12

Funding

In 2019 raised €2,300,000 Series A from Shiseido and Starburst Ventures

In 2017 raised €885,000 in a seed round from Shiseido and Starburst Ventures

Source: https://www.crunchbase.com/

SWOT

Strengths
- Completed several funding cycles
Existing partnership with Thales Group (designer of electrical systems for the aerospace, defence and transportation markets) to produce a built-in "connected aircraft" capabilities

Weaknesses
- No information about major airlines working with this solution

Opportunities
- Grow list of partners and clients

Threats
- The product can become redundant as some companies could opt-out to develop similar capabilities in-house
- Decrease in travel and in turn profitability due to Covid-19
- Competitive threats

AtYourGate

http://atyourgate.com/

Disclaimer: the founder of Insight Parrot has financial interest in AtYourGate

Description

Travellers have the possibility to use the app to have food and beverage as well as retail products delivered to their gate from most shops at covered airports. The USP is that travellers can order across terminal and security lines, enabling a wider breadth of dining options.
At the moment (10.2020) retail choices are quite limited but seems that they are looking to increase this segment.

AtYourGate has an existing partnership with Grab to make processes more efficient

Coverage

10 airports in the USA. primarily in big cities around East and West coast. Launching Chicago Midway International Airport and Philadelphia International Airport in November 2020

Founded

2016 in San Diego, USA by Chris Hartman and PJ Mastracchio

Number of Employees

35

Funding

In 2020 is raising $1,070,000 though crowdfunding platform Wefunder. In November 2020 it has raised ~$500,000

SWOT

Strengths
- Good & straight-forward service with happy customers (the app has 4.9 stars out of 5 in the App Store)
- Partnership with Grab to increase their footprint. Grab has existing partnership with Collinson, offering Grab with access to millions of travellers and Grab's products are being advertised on the Priority Pass app
- In partnership with Piaggio Fast Forward, AtYourGate delivery teams at JFK, Minneapolis-St. Paul, Denver and San Diego airports will soon be joined in their rounds by small Gita robots (source: https://www.businesstelegraph.co.uk/delivery-robots-to-digital-health-apps-5-ways-your-next-airport-visit-could-be-contactless/).
At your gate has the opportunity to reduce costs by using delivery robots.

Weaknesses
- Available only in the US

Opportunities
- International Growth
- Covid-19 could jump-start the contact-free food delivery at airports

Threats
- Covid-19 could decrease the amount of travellers
- Competitive threats

Bonflite

Description

Bonflite is a duty free shopping platform for air travellers. The platform enables travellers to purchase duty free items at any point during their travel itinerary and then collect them

Coverage

N/A. Partnership with Chinese airline Qingdao Airlines

Founded

2017 in Dublin, Ireland by Hongbo Sun and John Yashi LI

Number of Employees

6

Funding

In 2020 the company joined the Techstars accelerator ($120,000)

Source: https://www.crunchbase.com/

SWOT

Strengths
- Partnership with Qingdao Airlines
- Joined the Techstars accelerator

Weaknesses
- Seem that there is only one partnership with an airline

Opportunities
- Opportunity to use the network of the Techstars accelerator to get visibility and get more partners/clients

Threats
- Covid-19 has impacted negatively the financial statements of airlines. Airlines therefore could limit the funding for new ventures
- Competitive threats

Fetchy Fox

Description

FetchyFox has 2 services:
1. Food deliveries at the gate for passengers with reduced mobility
2. Airport-wide solution facilitating touchless pre-ordering, pickup and delivery of goods

Coverage

Ronald Reagan Washington National Airport, Washington’s Dulles Airport,
Edinburgh Airport

Founded

2016 in Sunnyvale, USA by Christina Apatow and Cha Li

Number of Employees

5

Funding

In 2018, $15,000 prize as part of an Airport Innovation Challenge by the Metropolitan Washington Airports Authority

SWOT

Strengths
- Focusing on travellers with reduced mobility
- In 2020 they have introduced a new service - an airport-wide touchless platform that could prove to be appealing to airports if it increases secondary revenue (retail, parking, etc.)

Weaknesses
- Limited coverage

Opportunities
- International Growth
- Covid-19 could jump-start the contact-free food delivery at airports

Threats
- Covid-19 could decrease the amount of travellers
- Competitive threats

Grab

Description

The biggest mobile ordering airport platform

Grab has several partnerships, most notably with American Airlines. The company also has an existing partnership with AtYourGate to make processes more efficient

Coverage

26 in the USA, 1 in Mexico, 10 in the UK, 2 in Sweden

Founded

2014 in Houston, USA by Mark Bergsrud

Number of Employees

15

Funding

Completed 2 investment rounds from Collinson for undisclosed amount

SWOT

Strengths
- Completed 2 investment rounds from Collinson
- Together with Inflyter and Collinson they will form Collinson Airport Alliance - an airport ecosystem that could prove appealing to airports as it could increase airport's secondary revenues (retail, dining, etc.)
- Due to the existing partnership with Collinson, Grab has access to millions of travellers and Grab's products are being advertised on the Priority Pass app
- Strong & executive team
- Good digital footprint

Weaknesses
- Concentrated in the US - lacking international coverage

Opportunities
-

Threats
-

Inflyter

Description

A platform digitising the duty free retail at airports. Travellers can order items through the app and it would be waiting in a secure locker at the airport

Coverage

Bahrain Airport

Founded

2015 in Paris, France by Wassim Saadé and Nicolas ROBERVAL

Number of Employees

5

Funding

Completed investment round from Collinson for undisclosed amount

SWOT

Strengths
- Together with Grab and Collinson they will form Collinson Airport Alliance - an airport ecosystem that could prove appealing to airports as it could increase airport's secondary revenues (retail, dining, etc.)

Weaknesses
- Limited coverage
- The solution needs airport space to install Inflyter lockers. As retail space is expensive the product is associated with high fixed costs meaning that it needs a solid stream of orders

Opportunities
- Opportunity to use Collinson's network to increase coverage

Threats
- Increase in airport space costs
- Reduction in travel due to Covid-19

MyDutyFree

Description

Service for pre-ordering goods in duty free retail shops. MyDutyFree is working together with the duty free retailers and is digitising their offerings. The items are pre-ordered and then picked up from the shop

Coverage

Domodedovo airport, Kazan airport, Irkutsk airport, Koltsovo airport, Kurumoch airport, Zhukovsky airport, Mumbai airport, Boryspil airport, Odesa airport, Kyiv airport, Baku airport

Founded

2015 in Kyiv, Ukraine with by Aleksandr Gusarov, Katerina Furtak

Number of Employees

8

Funding

In 2015 the company raised raised $600,000

Source: https://www.crunchbase.com/

SWOT

Strengths
- Present in a number of airports in Russia, Ukraine and India

Weaknesses
- No investment rounds have been completed since 2015

Opportunities
- Grow internationally

Threats
- Lots of Duty Free providers (e.g. Dufry) have developed similar products internally

SkyBuys

Description

A duty-free platform enabling travellers to shop remotely and have their goods waiting for them for pick-up at the airport's retailer

Coverage

N/A

Founded

2017 in Sydney, Australia by Alec Kemmery

Number of Employees

9

Funding

In 2019 completed a seed for an undisclosed amount

In 2018 completed a A$50,000 pre-seed funding round

In 2017 raised $250K in a pre-seed round from undisclosed investors

Source: https://www.crunchbase.com/

SWOT

Strengths
- Offering a $o cost integration solution for airlines
- Partnership with Heinemann Australia


Weaknesses
- Limited number of partners/clients

Opportunities
- Grow internationally

Threats
- Some Duty Free providers (e.g. Dufry) have developed similar products internally
- Reduction in travel due to Covid-19

iCoupon

Description

iCoupon is a B2B platform for digital vouchering in airports around the world. It provides a way for airlines and airport retailers to issue compensation, incentives and offers to travellers

Coverage

Close to 100 airports across Europe

Founded

2015 in Manchester, UK by Richard Bye

Number of Employees

6

Funding

-

SWOT

Strengths
- Close to 100 airports in Europe
- Lots of partners (airlines, airports, etc)

Weaknesses
- Limited coverage for other markets in APAC and America

Opportunities
- Grow internationally
- Partnership with companies that offer flight delay insurance products

Threats
- Competitive threats