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Welcome to What's in the Box, brought to you by Boxtech, Powering Retail with Purpose. Boxtech delivers innovative and

Welcome And Guest Introduction

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market leading customer engagement solutions that turn business ideas into a performing reality. From design and integration to ongoing support and maintenance, we're with you every step of the way. Now, today I always look forward to these. I really do, because every guest is different. This one in particular, I'm really looking forward to. As you'll see or here, you won't see because it's audio. You will hear in a moment. I'm fascinated because I think I'm going to be learning an awful lot from this one. So my guest today has been retail director at Heathrow Airport since 2018. Previously, he spent over four years at Heathrow Express as managing director and formerly commercial director. Prior to this, he worked at Gatwick Airport as head of travel services before moving across London to Heathrow. His roles at the UK's busiest airport have included head of travel services and managing director of Ultra Global PRT Transport Solutions. Welcome to What's in the Box, Fraser Brown.

SPEAKER_00 1:16

That's great. Andrew, thank you very much. I sound an exciting person by that introduction. I hope I can live up to it for uh for you and for the audience.

SPEAKER_01 1:25

Well, listen, I wonder first of all, because I think uh whether you are or not, I'm sure you are, but I think your business is incredibly exciting. I'm sure all our listeners have at one time or another been through probably all four of the terminals at uh at Heathrow, so they can uh they can kind of picture all of this. But I just want to throw out a few stats before we we get into this. So in I think 2025, the latest stat that I got on the number of people that went through

Heathrow Scale In Numbers

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84 and a half million. And putting that in context, that is around about three times that of either Westfield, White City, or the Trafford Centre. So that gives people an idea of the size and scale and the footfall of this retail operation. It's the busiest airport in Europe and fifth in the world. This year, Heathrow is celebrating its 80th birthday. Its busiest ever day was May the 22nd this year, with 262,000 passengers, which is to what, two and a half times the uh the capacity of Wembley Stadium going through in a single day? It's just incredible. And last figures I saw the the revenue, I think 791 million, which is up two and a half percent, while passenger numbers were plus 0.7%. So somebody is doing something right here, and uh I want to get into this now with with phrases. So tell us just uh just give us a little bit of an intro to Heathrow and as I say, the scale, the size and scale of the operation.

SPEAKER_00 3:03

That's great, thanks, Andrew. And and you're absolutely right. Biggest airport in Europe, one of the largest in the world. Uh and the one thing that is

Connectivity And Passenger Demographics

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unique about Heathrow, and and we are the world leader on, is the most connected airport in the world. So there is no airport in the world with the 250 or so connections, direct flights that we have, which means from a passenger point of view, not only do we have a very large number of people, so in retail terms, we would be more usually calling that footfall, the 84.5 million, as you quoted from last year, but also we have a fantastically interesting international demographic in that 84.5 million. About half of our passengers are UK residents, and the other half are from the rest of the world. Big pop big number from uh North America, US and Canada, is probably about 20% of the remaining number, but the last 30% are literally the world. Heathrow, because of those 250 connections, connects the United Kingdom and retailers, food and beverage operators, and business in general to 92% of the world's GDP on one of those destinations. So we are Britain's gateway to the world. About 75% of the UK's long haul flights terminate at Heathrow. So we are very much a connection to the world. So we think about the UK in a historical context as always being an island trading nation. We very much in the 21st century are supporting that history of an island trading nation. Bringing it more to retail for listeners, we have 275 retail units, about 75 food and beverage units. You mentioned the four terminals there across four terminals, terminal two, three, four, and five, terminal one having closed. And in addition to those four buildings, Andrew, there are three satellites as well, two that serve in addition to the main building in Terminal 5, and one satellite in addition to the main building in Terminal 2. So, like you know, many people that'll be listening to this, we worry about footfall, we worry about demographics, we worry about uh people's uh the macroeconomy and therefore people's affordability and desire to spend. But I think some of the things that are unique about Heathrow are that we do have that rising footfall, first and foremost. So we know the state of UK high streets is challenging, we know the straight of UK malls you referred to Westfield in your introduction. We are in the privileged position in Heathrow, and indeed for the travel retail community that Heathrow is part of, of having rising footfall. Also, that footfall demographically is relatively rich compared to any UK national or or you or other international measure. So we've got we've got good people coming. Also, the other interesting thing for people to think about, and they'll have experienced it as they traveled, is that we have dwell time. So once a

Faster Security And Longer Dwell

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passenger gets themselves to the airport, goes through the check-in process if they need to uh deposit a bag, and then goes through our security process, then they will be in a departure lounge and they'll have some dwell. Now, just to touch on that security process, there's a bit of positive and negative from my retail part of the world. We've spent the last two years or so investing in over 140 new security lanes. And listeners will have seen the benefit of that in terms of being able to go through that process, very important security process to keep us all safe in a much slicker way because you're not having to decant your liquids, you're not having to remove your laptop or your tablet from your bag. So, from a customer experience point of view, it's a lot nicer and slicker. From a time point of view, it's slicker. And actually, a stat for you from 2025, 97.3% of our passengers got through that process in less than five minutes. So the kind of traditional pain point, Andrew, that you know might people might have felt is not there. The result of that from a retail and an FB point of view is people are coming out of the back of that security process, both literally and figuratively, faster and in a better frame of mind, and it translates into slightly longer dwell on the departure lounge. So that's an opportunity for us. But as you said, we have had 84.5 million passengers last year, and our terminals haven't kept up pace in terms of their growth with the number of passengers. So, you know, we've got a great environment. We've been voted on a number of industry measures as having great levels of service. From a retail and an FB point of view, I'm particularly proud that Skytrax, which is an industry competition or survey voted for by passengers, voted Heathrow as the best airport for shopping in the world earlier this year. And we take great pride in that, along with those retailers and partners that work with us to provide that. And maybe I should just say very quickly what the model is because it is different from the high street. Those 275 shops, 75 FB

Concessions Model And Retail Intensity

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units. I provide the space, so in many cases, I could be compared to a shopping mall. I provide the shell and core, and the retailer that we select does the fit-out and runs the store, collects the money. The economic rent that we generate from those businesses is not though in the form of a traditional landlord and tenancy arrangement, it is purely a concession arrangement. So I am and the Heathrow Airport business is 100% aligned with the retailer and the brand around the success of the business relies on maximizing the take and the till, and that is what maximizes the revenues for the airport. And you referred in your introduction to that number of 791 million being the revenues. Now that's a mixture of what we earn from our retail business. We also wrap into there things like our car parking business, which is a a thing, as you as you said in the introduction that I used to run in the past. It's you mentioned Westfield to get to give people a sense of context, those retail and food and beverage units are turning over, we think, about as much as what both Westfields and London together do. And we're doing that off a footprint of only fifty-seven thousand or so square metres, about six hundred or so domestic semi-detached houses in the UK. So the thing the first thing, apart from the scale, for listeners perhaps to understand, it Heathrow is a challenge, which is the intensity of the trading. So we think we're probably about three times more intense per square metre as the Crown Estate's Regent Street property, for example. So really, really intense retail. No, no, you go through it.

SPEAKER_01 10:30

You mentioned there that you choose the brands and the retailers that come in. Could you give us an insight into

How Heathrow Chooses Brands

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how you go about that? Because I I know that you you need your essentials, which is your Delphead Smith and your boots and maybe Walterstons and all the rest of it. You need your duty-free and and luxury, but what goes into that mix? How how do you decide? Well, this brand's gonna come in and we don't want that one or whatever.

SPEAKER_00 11:00

So so the retail strategy and how we plan it starts with the corporate strategy. So at Heathrow we have a very simple, and it's and it's been since around about the Olympics time, so it stood the test of time corporately, 14 years now. A very simple four-word message on which is essentially continuous improvement. It's on my lanyard here, which is about making every journey better, Andrew. What we're about as a business is and HERO can be described in many dimensions. We you could consider it a city because you know we're the largest single site of employment. 86,000 people work on the campus across 400 companies. It can be described as a city because we've got the largest private water network in Europe, 32 miles of water pipes. You could describe it, you know, as the largest buy-to-lect property in the UK where you know we own the asset, we own the terminals, and we rent them out to airlines and to retailers. You could describe it all that way. But the way we think about it is that this is a service business. People want to connect either to visit friends and family, to go on a leisure break, or for business. And what we need to do, we believe, is to provide a great experience as they go through the airport. And that's the making every journey continuous improvement message, and it's in service of a vision, which is to say we want this airport to be brilliant, we want it to be an extraordinary airport and we want it to be fit for the future. And in that context, our retail planning starts with food and beverage, and it does that because food and beverage, clearly, if people are dwelling for a period, is a human need. We need to fuel the body. But we also know that food and beverage is a very emotive subject, so as well as being a need, it's a big driver of consumer satisfaction of the airport experience. So we plan the F and B first. So with limited space, and listeners should just always have that in mind as I go through the next couple of minutes. With limited space, how are we planning that space? Well, we're starting with FB. And within that, Andrew, obviously, you have different types. You have sit-down restaurants, the likes of casual dining with things like giraffe from the restaurant group or Wagamama or things like that, or Fortnum and Mason Champagne Bar. You then have grab and go businesses like a Pret or a Costa or a Starbucks. We've got the largest Pret buy sales in the world at Terminal 5, the largest Cafe Nero in the world, Airside at Terminal 3. We've got the country's largest by sales, Starbucks, in Terminal 5. So those are just three examples and proof points of that intensity I was speaking to earlier. So we plan the food and beverage first, and that is a service-led thing. Secondly, and you touched on it, duty-free, very important in a travel context. That's a big income driver for the airport. So we plan that out second. Then, and you mentioned it, Essentials, we will insert the brands like Lagadare's Really brand, which we've introduced, WH Smith, Boots, these types of products, we'll insert them where we can because we know that consumers will find them, they'll be looking out for them. So having planned the F and B and having planned the duty free, we then insert that. And then next comes luxury. Now, this is quite a challenge for us because luxury is quite space hungry. The the brands and the boutiques, the maisons that you would traditionally associate in the United Kingdom with being in Bond Street or in Selfridge's or in Harrods, in Europe on big shopping streets like Champs-Élysées Avenue Montaine in Paris, Via Napoleone in Milano, Calle Serrano in Madrid. These brands want to express their brand quite beautifully, quite make quite big statements. And that's quite challenging when you're space constrained. But traditionally the economics of those businesses have been quite attractive for us, and therefore we do allocate quite a large amount of space. I say traditionally, because one of the things that many of your listeners will not be aware of, is that when the United

Luxury Space Limits And Tax-Free Shift

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Kingdom finally left the European Union after the transition period and Brexit, there was a fiscal decision made by the Conservative government of the time, Prime Minister Johnson and Chancellor Sunak to remove that free shopping. That's had a significant effect on Heathrow, as it has on the likes of Bister and some of the luxury retail environments in London, where international travellers now are at a structural disadvantage versus what they might have in pretty much any other jurisdiction in the world where they would be used to tax refund shopping on a high street when they are travelling and a tax-free proposition when they are in an airport. Heathrow now finds itself fiscally out of step. I've described it before as a tourist tax when we've talked about it with government, but it does make that business a little bit a little bit trickier. I'm not going to go on too more about it. But it is a matter that we continue to engage with stakeholders in government on. But we plan luxury next. And then last in that list, just to finish, is we then plan high street retail. So what might some of your listeners may well work for some of those high street retail businesses, the likes of a boss or a Reese or a JD Sport. And I'm often challenged by people saying you've not got enough high street. And I hopefully that I've just explained in that space hierarchy and allocation why that is. It's it's kind of crowded out by everything else and the fact that we are space constrained, Andrew.

SPEAKER_01 17:02

Yeah, yeah. Fraser, we've got a couple of minutes left, and I wanted just to ask you to talk a little bit about you, because I know you you've

The Four Retail Pillars

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got a particular mantra, I think I'm right in saying, and if I get this right, it's which I think is great. Digital experience, space, and offer, which I think is fantastic, and and I can identify from my you know retail background and so forth with that. But just for the last couple of minutes, tell us uh a bit about that and how that translates into the the the passenger, the customer experience that they they get when they go through each road.

SPEAKER_00 17:38

Yeah, as you said in the intro, I've been I've been doing this now for about seven years, and I had about 15 months of learning my my retail craft before the pandemic hit, which you know we could have a whole podcast on how you run a retail business at an airport through a pandemic where you have virtually no customers. But in that 15 months, we we we we thought really hard about some of the fundamental levers that were at our disposal and some of the advantages that we have. I've mentioned footfall before. We talked a lot about that because a lot of retail will be worried about e-commerce. We're not naive to that, but we have this advantage of this rising footfall, and how are we gonna make sure we capitalize on it? And we came up as a team with these kind of four pillars, as you say, of digital experience space and offer. And we kind of start with space, and I think I've talked about it at length. So I'm not gonna repeat, other than say having our mind that space is at a premium. So how retailers use it in a very intelligent way is a key thing for us. Then we think about in that space what products and pro and propositions are gonna be there. That's the offer element, and what we're thinking about is not just the physical products, but the experience. So I often say to the team and to prospective retailers, we can't out-Amazon Amazon. So 350 million SKUs, next day delivery, you're not gonna compete with that. But what we can do is have a physical experience that at the moment Jeff Bezos and the team haven't figured out how to do that. So, you know, rather than worry about trying to out-Amazon Amazon, focus on what we can do better, and that is provide brand retailers with the opportunity to have a physical experience which they can then showcase their brand to passengers. And then the last part of that jigsaw is then saying how do we do that both physically in the stores, creating great experiences with the offers, but also make people aware of it. And just very briefly, we're in the foothills of then trying to also, as well as physical retail, start to use Heathrow.com,

Heathrow Marketplace And 30-Minute Collect

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our website, to try to do a bit of digital retail. Airports and Heathrow is this is no different, have had a long history in having an e-commerce business, but candidly it's been focused really on car parking. And what we're now trying to do is to say consumers are we can see this on our website, are more and more now pre-searching for what the offer is before they travel. We've seen this post-pandemic. Let's make sure we at least make our offer visible so that people know what they can get, that kind of ropo idea of research online, purchase offline. But also, how can we start to make them uh have the ability to transact? So we've created the marketplace, we've done the hard work with the payment solutions, the legals around us being a marketplace and not the merchant of record, and we've started to onboard some small retailers who, in themselves, Andrew, wouldn't be big enough and command enough productivity to warrant physical space, but we can have a digital space. And what we do with that, very much like the UK Argos model, is have a small front-of-house collection point and have a stock. And different from Amazon, there's no point in having next day delivery if you're waiting only an hour for a flight. We're offering what I think is world-leading fulfillment by saying if you order on your smartphone while you're in the departure lounge, you'd be able to collect it within 30 minutes. Now, in terms of results, it's too early to comment on that. We're just in the foothills of testing it, small number of brands, but we think that could help consumers in terms of having an online offer and help us in terms of our space challenge. Yeah.

SPEAKER_01 21:29

And that's a fantastic, uh, fantastic point to uh to uh finish on. We're we're out of time. Fraser, thank you so much. That it's just fascinating, and we could talk, I'm sure, for hours because there's so many aspects of uh of of this. I find it, as I say, really fascinating. So that's all from what's in the box for now. New episodes will be dropping every two weeks, so please stay tuned. And if you want to find out more about Box Tech, please follow the link in the description. Thanks for listening, and thanks

Closing And How To Follow

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so much, Fraser Brown.