Fasten Your Seatbelts: The Future Of Shopping Looks A Lot Like Airline Travel

An airline ticket used to mean gratis champagne and dressing for the occasion. Today, it means $25 luggage fees and Juicy track suits. A former American Airlines exec explains how retailers will increasingly mimic how we purchase and consume air travel.

Fast-forward 10 years from now: You’re at the mall doing some shopping, scrambling to get the next great gift for a friend or loved one. How exactly will that retail experience be different than it is today?

I think the recent history of how we purchase and consume air travel gives us a pretty good indication.

Currently, an increasing number of us shop using our smartphones to compare prices and buy or wish-list the items we like from an online retailer. These e-retailers then deliver the products to our doorstep, offer free shipping and easy returns, and help the customer save money in the process. However, many of us still do our shopping in traditional brick-and-mortar stores. In return, we get access to an array of in-store-only services and features that are included in the price of your purchase: knowledgeable staff, personalized fittings, and the like.

In the wild, early days of airline deregulation, when I worked for American Airlines, buying an airline ticket had many similarities to current in-store retailers. You bought a ticket and everything else–-the meals, the checked luggage, the ability to pick your seat-–was included, or "all-in."

As anyone who has flown commercial in the past 20 years can tell you, that’s no longer the case. Now we pay extra for everything.

Over the past few decades, the airline industry, pressured by skyrocketing fuel prices and roiling global competition, learned that customers care about price. They learned that customers care about price so much that they are willing to switch airlines to find a ticket that is just a dollar or two cheaper.

And, over nearly three decades, airlines became exceptionally capable of monitoring, managing, and matching the prices of their competitors–-and it happens lightning fast, hundreds of millions of times per day. There is no marketplace more fast-paced or technically advanced than that for air travel: mobile boarding passes, loyalty points for using the "right" credit card, added costs for in-flight food or checked luggage, and ticket prices that change by the second or faster.

But airlines have also learned that customers will pay extra for what they value.

Traditional brick-and-mortar retailers have taken steps to evolve in a similar fashion, but they ultimately still look a lot like they did 10 or more years ago, despite the incredible growth in market share of America’s online retail leaders. There are still static price "stickers" on shelves, while online competitors change prices by the minute. Furthermore, they still provide additional services for free (like dressing rooms, cash registers, and check-out personnel) that many customers simply don’t value anymore.

Merchants need to quickly learn the lessons that airlines have over the last 30 years: Deal with a shopper’s lust for price-parity, and compete on a new level based on providing the features that customers value and are unique to brick-and-mortar retailers.

Retailers are already well aware that an increasing number of customers come into their stores to try out products, only to leave and make the final purchase online for less money. More importantly, an increasing number of customers don’t come to the store at all.

This is the problem that must be solved.

Airlines have taken a commodity (a seat on a plane) and caused us to change our view about what we’re buying and how we’re buying it. It’s no longer about buying a product at the cheapest price, it’s about selecting and paying for a package of services that we value most—from an aisle seat, to a faster security lines, in-flight meals, rewards for frequent patronage, or in-flight Wi-Fi connectivity.

If retail is to remain relevant, I wouldn’t be at all surprised to see the same trend happen with its own unique twists and innovation: A Hint water while you shop for your Gap jeans and shirts? A dressing room with the option to prepay for your purchase? The best price for a product offered only in-store? If retailers can find a way to make this transition without sacrificing customer satisfaction–something the airline industry has failed to do despite (or perhaps because of) its emphasis on pricing-–they will be in a better position to accommodate the shoppers of the future.

When exactly we get to this point with traditional retailers is anybody’s guess. But the journey has already started, and, if the experience of the airline industry can tell us anything, we pretty much know where it will end.

—Jeff Katz worked for American Airlines for nearly 20 years, and was CEO of Swissair from 1997-2000 before joining Orbitz as the founding Chairman and CEO. He is currently the CEO of Wize Commerce, a digital marketing company that generates over $1 billion a year for merchants through the global network of shopping sites it owns—including Nextag—and operates and through technologies that optimize revenue and traffic across every channel, device, and digital ecosystem.

[Image: Flickr user Sean Munson]

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8 Comments

  • Kurren

    Very poor points given here, from somebody that's coming from an industry that, in the US as everywhere else, has been surviving on state subsidies and it's now synonym with poor service and bad practice.

    Not that this guy did a really exciting job at Swiss Air, neither...

  • Matt Williams

    So an Airline EXEC of Failed industry that has seen way to many Bankruptcy and cannot make its customer happy if it wanted to is now given us advice on how to run our E commerce and Brick an Morter Stores.. What a Waste of Cyber ink!.

  • Gabby101

    Airlines sell a commodity. No one wants to pay more to fly on United vs. American, e.g., because the experience is virtually the same.  Also, there is a cost associated with offering food on flight and no real benefit for the airline.  For the Gap, having people try stuff on reduces the number of returns, so they get something for the space they devote to fitting rooms.  It's also a profitable area to try and up-sell.  Silly article.

  • Nnavila

    I read the article and hope it won't end the way the author stated. There is no comparison between shopping on line and in bricks and mortal store. What is happening, from my perspective is just an delusion, or trend that people are going through. Soon people will realize an alacarte service will cost them more than the comprehensive services.
    Look at China, please don't tell me that no one was able to foresee what are currently happen now in the area of cost and manufacturing.

  • Michael Brill

    Your basic argument that consumers will expect price parity offline and online is right on.  And I think the message that offline retail needs to provide shopping experiences that cannot be offered online makes tons of sense as well.  But I don't get the comparison to the airline industry... you are proposing adding new capabilities, not unbundling existing offering.  Again, I agree with that but it does seem like you're trying to force the comparison... and, as nosybear points out, it ain't a very good place to be.

  • Kit Sim

    More and more retailers ought to differentiate themselves. Exclusivity, competing beyond price are just a few ways to combat. Fashion retailers, especially those with private labels, will stand a better chance to last. After all, fashion is an art. 
    Check out The Fashion Retail Revolution
    http://www.ksleconsulting.com/... 

  • Nosybear

    Okay, Mr. Exec, explain why Southwest, which offers mostly everything for one price, is profitable while you either are or soon will be again in bankruptcy?  Your analogy is valid for an industry that, on balance, has returned negative equity for the last 30-plus years (the net income from airlines over the past 30-plus years has been less than zero.  There have been winners (Southwest) and losers (American, twice in bankruptcy over the period) but on balance the industry has lost money).  The common joke is how do you make a small fortune in commercial aviation?  Start with a large one.  Why anyone would want to copy any of your business models outside of Southwest's evades me:  It seems a great way to lose money.