Transit-oriented developments (TODs) are a fast-growing and lucrative trend throughout busy APAC cities, where expanding populations and limited space are putting increased pressure on the region’s urban sprawl.
TODs are a type of urban planning that includes a mix of commercial, residential, office, and entertainment centered around or within popular commuter corridors, such as a railroad station. The convenience for customers is clear. Other benefits include lowering pollution and traffic congestion, while increasing the use of public transport and adding to the local economy. In addition, people are freed from the expense of owning a car, leaving them with more disposable income.
Naturally, retailers are seizing the opportunities afforded by these developments and the high concentration of people travelling through them.
“There is huge value in just the sheer quantity of people who pass through train stations,” said James Berry, director of transportation and infrastructure at architecture company Woods Bagot. “Airports have picked up on that already and have been able to secure revenue from those volumes of people.”
Up, Up, And Away
Airlines in the Asia-Pacific region carry the largest number of passengers worldwide, who often arrive at airports hours ahead of their flight. Retail outlets, located between security and airline gates, provide a way for them to pass the time, featuring hundreds of designer brand outlets, relaxation treatments, restaurants, bars, and shops.
“Leisure travellers find themselves with time on their hands and in a holiday spirit,” Berry said. “In that mindset, they’re more inclined to spend money. Airports take advantage of that and make millions–to the point where many airports make almost as much money out of retail than the transport system.”
Berry’s right. According to Generation research, global duty free and travel retail sales reached US $68.6 billion in 2017, with Asia Pacific leading the world with a 45% share of global sales.
Berry pointed to Changi Airport, where more than 62.2 million travellers pass through annually, as the epitome of excellence in transit-oriented design.
“More than just a functional transport hub, we aim to enhance the travel experience for passengers by offering a range of shopping, dining, and entertainment facilities,” said Ivan Tan, group senior vice president, corporate and marketing communications at Changi Airport. “As the airport continues to grow its retail business, we constantly challenge ourselves to bring in new concepts and experiences for our passengers and visitors. This makes shopping here vibrant and exciting, ensuring that each journey through Changi is memorable and surprising.”
Non-aeronautical revenue contributes to half of Changi Airport’s total revenue and subsidises the aeronautical fees charged to airlines, Tan aded.
Full Steam Ahead
Train stations are also working hard to tap into the traveller mindset, according to Woods Bagot’s Berry.
“There are significantly more people passing through rail stations than ever before,” said Berry, who is currently working on a multimillion-dollar upgrade for Sydney’s Central Station, featuring an expanded retail precinct. “Stations started to reinvent themselves as mixed-use developments over the last two decades, and we now have the commercial opportunity to refurbish and add substantial retail offerings.”
Urban infrastructure developments such as the new high-speed rail line between Kuala Lumpur and Singapore create more opportunities for transit-oriented retail, and developments are customised to the unique requirements of the area. Stations are built multilevel, self-contained, and temperature-controlled due to the shortage of space and Singapore’s monsoonal climate, where thunderstorms regularly force large numbers of commuters to shelter in these developments.
Similarly, Hong Kong TOD Elements boasts 1 million square feet of retail space connecting four of the country’s busiest rail lines. Elements contains a 1,600-seat cinema, an ice-skating rink, and 123 retail outlets. In-station retail in Hong Kong generates approximately AU$359 million (US$265.2 million) annually, prompting developers to tailor projects to the preferences of consumers who prioritise convenience and proximity to transportation.
High Tech, High Reward
According to Berry, the key to attracting customers is in the data. “If you can understand how the visibility and positioning of retail influences people, you can encourage people to buy more easily and frequently,” he said. “Digital analysis allows us to understand the flow of passengers and customers, so we can graph people’s sight lines and determine what the ‘sweet spot’ is that will be visible to the most people.”
In high-volume spaces like train stations, retailers are often more concerned with recognition and brand visibility than sales, Berry said. For instance, car manufacturer Ford have several concept stores in TODs.
Airports are also using the data provided by international flight arrival times to adjust their offerings and featured displays according to the nationality of the disembarking passengers.
“For example, when Japanese flights land, retailers change the window display to feature products that will specifically appeal to Japanese tourists,” Berry explained. “If you know that some groups will buy items that other nationalities aren’t interested in, then you can alter the offering based on incoming flights.”
The same could hold true at train stations, he added. “If you know there were certain groups coming through at certain times, you could target them in an even more direct way,” he said.
To capitalise on the popularity of online shopping, stations are trialling digital purchasing. In Korea, Tesco HomePlus has opened virtual grocery stores inside train stations where customers can choose products displayed on billboards on platforms. Each product has a QR code that can be scanned with a smartphone and added to an online shopping cart. After the transaction is complete, the goods are delivered on the same day. If the train arrives before customers are finished, they can continue shopping on their phones as they travel.
“In this instance, the train becomes just a portal for choosing, selecting, and paying for retail goods,” Berry said. “And, of course, offering goods in a way that takes up almost no space is incredibly valuable in underground station environments.”