Airport sellers: Find the silver lining
Lugging that bottle of duty-free Blue Label on the plane is out of the question. Send it to your customers instead.
By Parija B. Kavilanz, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Rather than fret about how tough security restrictions bite into business, analysts say airport merchants should quickly adapt to the new reality in order to keep sales flying off the shelves.

There's $25 billion at stake from global duty-free and travel sales at airports worldwide, and with security at a heightened alert for the foreseeable future, the way people shop at airports will be altered, said Alex Evered, analyst with London-based consulting firm Pragma, specializing in airport commerce.

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These restrictions hit those merchants located before the security checkpoints harder because travelers worry about whether or not they'll be allowed to take their duty-free purchase on board, he said.

New travel rules enforced last week by the Transportation Security Administration (TSA), forbid passengers to carry most liquids, cosmetics or gels on board any domestic or international flight.

Therein lies the opportunity

"It's an interesting dynamic," said Marshal Cohen, chief retail industry analyst with market research firm NPD Group. "The clever merchants will adapt their strategies quickly."

For instance, Cohen thinks duty-free merchants could do well and even boost their sales with a few adjustments like arranging for customers to pick up their purchases at their destination.

High-end merchants like Coach (Charts) or Burberry should also think about offering customers the option of shipping their purchase to their home address for an extra charge, Evered said.

Retailers could work with airport operators to allow passengers to add their purchases to their carry-on luggage after they have already boarded the aircraft.

"There are a number of ways around the system, Evered said.

Some duty-free operators, like Zurich-based The Nuance Group, say innovation on the part of retailers isn't the issue. It's the roadblocks in implementing them.

Nuance is the world's largest operator of airport duty-free stores with 330 shops in 59 airports around the world.

In an interview with CNNMoney.com, Richard Rendek, CEO of The Nuance's North America operations, said his company has "suffered a great deal" from the new restrictions, with sales off as much as 60 percent in Canada but much less in the United States.

"We're veterans in this business. We dealt with 9/11 and with the SARS scare. The first goal is to ensure passengers' safety. They are the lifeblood of our business and we applaud the governments' efforts there," Rendek said.

At the same time, Rendek said the suggestion to enable customers to pick up their purchases at destination doesn't make sense.

"There are different duty-free operators in every single airport. So this is like suggesting that we all find an agreement to do consolidated business together," he said.

What might work instead is for airport merchants to establish a dialogue to address everyone's concerns.

"We've been talking with the TSA and they've agreed to let our customers pick up their purchases at the boarding gate," Rendek said.

"But if these type of restrictions stay, the ultimate solution here in the United States and elsewhere is to establish duty-free [outlets] at airport arrivals," he added.

Stay on top of carry-on restrictions for better travel. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.