The Economics of Airport Shopping

One of the things I like about talking (or, in this case, "talking") to economists is that it often turns out that life's little mysteries have answers. Maria Farrell, for example, had an eloquent post complaining about how airport shops don't seem to offer the goods that one would actually want to buy in an airport. Tyler Cowen comes along with a plausible, yet convincing, account of why these things shake out the way they do.

Photo by Flickr user Hyogushi used under a Creative Commons license

Comments

"Plausible, yet convincing"? Isn't that like describing somebody as "fat, yet obsese"?

Posted by S. Tarzan | August 31, 2007 4:14 PM

"Plausible, yet convincing"? Isn't that like describing somebody as "fat, yet obsese"?

More like 'lukewarm, yet hot'.

Actually the best explanations come from the comments at Tyler's page.

Posted by RC | August 31, 2007 4:25 PM

Slogan at Akbar and Jeff's Airport Hut:

When you're stuck at the airport, you're stuck with us.

Posted by ed | August 31, 2007 4:29 PM

Toilets again? Leave poor Senator Craig alone.

Posted by Mac | August 31, 2007 4:31 PM

Maria Farrell probably hasn't been in the Dubai airport, or she would have mentioned it. The Dubai airport has a duty free shop that takes up an entire airport floor. You can buy ANYTHING there. Well, maybe not anything. If you want to buy a large cache of weapons or some plutonium, you'll have to do that in the smoking lounge. But you can buy a new Mercedes in the duty free shop. I'm not kidding. I still haven't figured out how you would get it on the plane, but you can buy it. And if you don't want a Mercedes, there are plenty of other upscale brands to chose from. And they have TV's, stereos, wine and liquor (probably the most popular, given the restrictions outside the airport). And the rest of the airport is still full of the same shops, bars and restaurants that you would see in any other international terminal. I've been in a lot of airports, but I've never seen anything like the Dubai airport.

Posted by fostert | August 31, 2007 5:39 PM

There's a Fox News Store at Dulles.

A Fox News Store.

Yes, this exists.

We're so fucking doomed.

Posted by ed | August 31, 2007 6:09 PM

These people are idiots. Rich people do not buy overpriced brands in an airport that are knocked off on canal street. They don't buy stuff in airports, at all.

These shops are for the vast majority of travellers who fly internationally infrequently, and are meant to be "bargains." And the margin on those people is much higher than on any service or good you'd provide a frequent traveller (who is off in his FF lounge, sipping a cognac).

It weirds me out that economists of all people would consider the brands in international airports as upscale. (I except Dubai. Never been there. By all accounts, a weird place.)

Posted by jayackroyd | August 31, 2007 11:33 PM

jayackroyd: yes, the markups are high. But airport duty-free has long been the last hoorah of the travel experience. For many people, still, the selection of certain goods in an airport shop -- booze, tobacco, perfume -- far exceeds that available locally.

And there are still useful bits of arbitrage. If you're flying to Scandinavia, you take as much booze as your customs allowance permits. By doing so, you make many, many friends. (Ideally, you fly into Norway (non-EU) and take advantage of duty-free rates.)

Americans generally aren't as tied into the whole duty-free phenomenon, unless they're near the border. That, in part, explains why most US international hubs have shitty duty-free shops. But the US airport model is also based upon shortish layovers for domestic flights, rather than longish layovers for international flights, which accounts in part for the retail model. (This is the perspective from which McMegan extrapolates.)

Plus, you still have the issue of architecture built around the pre-2001 model of gate-based security, so that many airports still have very little retail (or anything of recreational value) after screening, even though travellers are often expected to loiter for a couple of hours after security theatre.

Schiphol is lovely for so many reasons, because it anticipates the needs of people who end up there. It has luggage lockers for people on long layovers who fancy a quick train ride into Amsterdam without their carry-ons. It has showers, private rooms, and sleeping/quiet areas. It has a little museum and a casino. If the wi-fi were free, it would be perfect.

Posted by pseudonymous in nc | September 1, 2007 12:07 PM