Is Onboard eCommerce the next big Ancillary Revenue Opportunity?
Few things are more important to the airline industry than ancillary revenue.
An average airline earns around $17 per passenger in ancillary revenues from add-ons and partners. Ancillary revenue strategies vary from carrier to carrier, with some low cost carriers deriving as much as 40% of their revenue from streams other than the base ticket price. But in an industry where an average airline’s profit per passenger is also in the $17 range, potential income from partners and additional services is too important for any carrier to ignore.
Yet most of this ancillary revenue is earned before someone boards the aircraft - with the most notable exception being food and duty free items bought on board.
In flight internet has the potential to transform this. By 2035, LSE and Inmarsat estimate that around a quarter of all airlines’ ancillary revenue will come as a result of in-flight connectivity. Half this revenue will come from those airlines choosing to charge for connectivity, but the other half comes from opportunities presented by inflight advertising and particularly inflight eCommerce.
Customers already have the means to access in flight eCommerce. Nearly every customer flying today has a portable digital device, whether it’s a smartphone or a laptop. Around 60% of all customers will install the airline’s app, and a similar number will visit the airlines’ wifi portal page in flight - even if they don’t buy wifi access.
At the most basic level, allowing customers to purchase food and goods already sold on board via mobile app makes the ordering process less reliant on attracting the attention of cabin crew, allowing more promotional opportunities and streamlining the transaction itself.
But in-flight ecommerce possibilities go much further. Many passengers have still have not booked onward travel by the time they fly. And what better time for them to consider that than a multi-hour journey? They have fewer demands on their time, and the need for onward transport or interest in booking leisure activities for the next few days is that bit more urgent.
In-flight connectivity enables customers to make those decisions on board. An airline’s own e-Commerce platform is likely to be an attractive starting point, and we build onboard eCommerce platforms which run faster and more reliably than the rest of the web, which can be made accessible to passengers even if they haven’t paid for the wifi.
At FrontM, we’re also taking a creative approach to onboard eCommerce that’s not just about providing an interface for purchasing and earning loyalty points. By providing interactive Destination Explorers, we inform and entertain as well as showcase activities and promotions offered by the airline’s travel partners. By providing a friendly chat-style interface, with Intelligent Assistants answering questions about their destination, we provide customers with answers to their questions, and not simply a shopping cart. And lastly, we're looking to add premium entertainment experiences that customers might be prepared to pay extra for. Think "app store for your airline".
We're pleased to be developing solutions for some of the world's most admired airlines, and would be delighted to show you more.