The Why #91 Why are there so many luxury stores in airports?
Question submitted by Lachlan, Abbotsford
You know Lach, you’ve got a point. Somewhere along the way, the airport retail experience went from bad sandwiches and worse coffee to a fully blown, hoity toity menagerie; luxury clothing designer bags, showy sunglasses and watches worth more than my first (and second) car. Plus there’s the fancy fragrances, high end booze and top tier electronics all eyeing off our credit cards before we’ve even left the ground.
It’s almost as if the hour before boarding is open season for luxury goods, without any of the guilt, hesitancy or lets be honest, rational thought that normally comes in tow.
It’s enough to make a guy wonder:
1. Whether he should sell his agency and use the proceeds to open a store that exclusively sells designer neck pillows at the airport, and;
2. What on earth is causing the airport retail reality distortion?
Mental Accounting
Mental Accounting is a bias that refers to our tendency to treat money differently, even though objectively, it’s all the same.
A 1984 study by Kahneman and Tversky identified the three factors that influence the subjective value we place on our cash. These are:
1. Where it comes from
Unexpected ‘windfall’ money — be it a one off bonus, a tax return, a government grant or a gift from Aunty June — is spent more liberally than money we earn through our regular jobs.
2. What it’s for
We tend to put money into separate mental folders; $70 for the holiday fund, $130 for groceries, $200 for a rainy day. Strangely, we do this even if the money we set aside for ‘saving’ ends up costing us, because of the interest we’re racking up on a credit card that we’ve chosen to not pay down.
3. Category limits
Subconsciously, we place arbitrary thresholds on what we’ll spend on certain things. $240 bed sheets with free shipping? Let’s do it. $190 bed sheets plus $50 postage? You’ve got to be kidding!
And it’s behind door number two that we find our solution to the airport luxury spree conundrum. Once we’re on the other side of those security doors, it seems that our brains officially click over into ‘holiday’ mode and our attitude to spending follows suit. Designer hat purchases are met with the same level of scrutiny as a fourth poolside cocktail, rather than the rent risking spreadsheeting they deserve.
Over time, luxury brands have come to realise this, causing the worldwide transformation of departure lounges before our very eyes.
One takeaway for Challenger brands, is to look for audiences spending windfall (rather than hard earned) money (hello punters, EOFY bonus recipients and recent inheritees). Beyond this, it pays to consider which ‘folder’ your customers are placing you in and the associated pricing limits that go with it. Afterall, who wants to be selling bad sandwiches when overpriced scarves are all the rage?
Behaviourally Yours,
PS If you missed the last edition, you can still check out why we keep buying new versions of the same old clothes here.
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