News: Navigating a new retail plan

(FR 06/05/2006) Mumbai - Will you purchase an airline ticket as impulsively as you buy a T-shirt? Or, when an attendant tanks up petrol in your car, will your husband saunter over to a nearby kiosk andimpulsively pick up that ticket-for-two to Goa? Not quite sure? Deccan Aviation, which runs the Air Deccan-branded low-cost carrier, is betting you will.

The Bangalore-based company, India's first discount airline, is pushing hard to open up a new air-ticket retailing channel to customers, over the travel agent and internet-based models that together account for over 95% of ticket sales in India today. It has arrangements with oilretailer Bharat Petroleum Corporation Ltd. and Reliance Infocomm to sell its tickets through petrol stations and the latter's `WebWorld' outlets.

“At present, a consumer is getting tickets at his workplace or at home through various channels,” says Air Deccan chief revenue officer John Kuruvilla. “We would like to see our tickets are sold on holidays near their residence when they step out on these days. Easy accessibility of our tickets is the main motive of roping in the retail outlets.” The airline, which sells tickets through 200 Hindustan Petro outlets and 199 WebWorlds, is also in talks with few big retail chains to hawk tickets. The aim: make air travel an impulse-buying habit.

The FMCG (short for fast moving consumer goods)-model—in vogue in Europe and the US—is finding more buyers in India’s booming aviation market. GoAir, the airline started by the Bombay Dyeing group, and United Breweries’ newest business Kingfisher Airlines aim to take the non-travel agent retail route. Kingfisher is experimenting ticket sales with two retail chains, besides the over 100 WebWorlds it sells through.

“Retailing has become a big game in India. By the end of the fiscal, we are targeting around 6,000 point of sales of Kingfisher tickets. This would give more width and depth to our distribution,” says the airline’s marketing head Manoj Chacko. “The logic of selling airline tickets is to ensure that a consumer gets a Kingfisher airline ticket as and when needed.” The airline sells 3%-5% of its tickets through the retail channel today.

GoAir is aiming to lure the train passenger through its go-retail strategy and is in discussion with outlets of Tata Indicom, lotteries and cyber cafes, besides its parent’s stores. Says Raj Halve, GoAir chief commercial officer: “This would make it easier to purchase tickets for consumers who do not possess a credit card or have ready access to the internet. It would be an incentive to potential passengers, especially regular train travellers who are largely from remote areas where travel agents do not have an extensive network.” Such sales, he expects, will be in low double digits with potential for growth as the consumer base expands.

At about 5% of the total Rs 14,000-crore international and domestic ticket market, the new emerging retail channel will then account for about Rs 700 crore—not an insignificant market. The ticketing market is still dominated 80% by travel agents followed by 15% of bookings done through the internet.

The new channel also presents an opportunity to further the reach of airline brands. Air Deccan's Kuruvilla says going through retail channels will help “top of the mind recall of the airline’s brand”. Adds Chacko: “For our product, it is important to tie up with retail chains although with a stipulation. The audience we are targeting is vital during such tie-ups. There should not be any kind of erosion of our brand and hence it will be done in a sophisticated manner.” What do the big retail chains think of the trend? Enthused, going by Pantaloon Retail India’s plans. The country’s largest retail chain is exploring having a tie-up with a travel company or an airline to set up a travel desk in its Central Malls on a non-rental basis and is working to a year-end deadline.

Central Mall chief relationship manager Jaydeep Shetty says: “While it would give a national distribution presence for the airline companies, it would result in a higher proportion of spending per consumer at the Central stores. We are targeting leisure travellers and not our usual customer. The tickets will be sold at market rates and not lower than prices offered by travel agents or on the internet.”

According to Spicejet director Ajay Singh, “We are selling a small portion of our tickets through an arrangement with HPCL outlets but we are not keen in expanding this distribution channel. For a low cost carrier, e-ticketing is the cheapest way to sell tickets and also maintain low fares.”

Others sound a cautionary note, too. According to Shoppers Stop CEO B S Nagesh, the future may be uncertain for retailers who get into selling air tickets.

Retail analyst Susil Dungarwal scoffs at the convenience spiel the airlines and retail chains are espousing.

“The nearest retailer is still much more far than a computer. If the ticket pricing in retail chains is better than e-ticketing or travel agents, only then will the consumer buy through retail outlets,” he says. That's a prediction the airlines would love to disprove.