Does a transition to digital retailing make sense for an airline?

We know that the existing digital relationship between airlines and their passengers is unstructured and needs rethinking. The transition to a new fit-for-purpose digital retail environment, based on business agility and customer-centricity, is essential to meet future airline distribution needs.

But what will the airline digital retail environment of the future look like? What is driving the airline industry towards becoming more digital and forcing airlines to become retailers?

NB This is a viewpoint by Daniel Friedli, managing director and partner of Travel in Motion, for Datalex.

In this article we outline what a digital retail environment is, its benefits and why it is important. We also consider the challenges of making the transition and identify the three main steps in evaluating and preparing for a transformation.

Finally we ask whether a digital retail environment can serve the purpose of, and eventually replace, the PSS?

The digital retail environment

A digital retail environment which meets an airline’s needs has to fulfil many roles – it should be customer-centric, omnichannel, agile, and data rich. But what do we mean by a digital retail environment?

The digital retailing environment is an omnichannel offer and order management system with workflow management, business rules, data analytics and customer-centricity at the core.

From a technical aspect, it is accessible, modular, extensible and flexible.

Accessible has several aspects to it:

  • Open APIs (Application Programming Interface), meaning that functions and data can be accessed easily and in a structured way, allowing various entities to utilise the system from different applications and for different purposes;
  • Open architecture, meaning that the code and engineering is easy to understand, allowing the airline to modify parts of the system as it sees fit to optimally address its business needs;
  • Open in terms of data and data access, allowing the airline to take full advantage of its data for analytics and optimisation throughout the digital retail environment.

Modularity allows an airline to tailor the environment to its needs by adding different components. In many cases, a single product or vendor will offer many of the required components. It is essential that components and modules from other vendors can be integrated, ensuring that an airline is not locked to a single vendor. This will allow an airline to follow a best-of-breed, or rather, a best-of-need strategy.

Extensibility and flexibility in a base platform will allow airlines to expand the capability of the environment over time, and to adapt the environment to the ever-changing business needs and requirements.

The level of extensibility is a direct result of the openness and modularity of the base platform selected, while the level of flexibility is a result of the maturity of the business rules and workflow integration.

Why a digital retail environment?

Online retailers sell goods today by ensuring that the entire shopping experience is about the customer, concentrating on the most effective way to place, promote and price their products and services.

Information about products is easy to access while ratings and other consumers’ opinions are made available to support buying decisions.

Behind the scenes, retailers are using platforms which allows for flexibility, interactivity and the extensive use of data. Airlines are keeping a close watch on the marketplace models of Amazon and eBay as retailers, and Uber and Airbnb as travel industry disruptors, and their best practice in terms of upselling, cross selling, notifications and payments.

Several travel start-ups are looking to benefit from the consumers’ familiarity with the marketplace concept, but what can airlines learn from this when developing their own digital retail environment?

Ability to focus on the customer

The ability to personalise the shopping experience comes from not only having the right data available but also having systems which know how to interpret the data and act accordingly. Sophisticated retailing systems have both.

Knowing a person’s details and the offers made or items purchased is the first step; more important is the ability to recognise patterns and use algorithms to understand ‘what now’ and ‘what next’.

Most airlines, even if they have this data somewhere available, are currently not able to utilise this data to their advantage.

Ability to control offers and products

Consumers searching for products want to select from a well curated and targeted list of results. Airlines are in a unique position not only because they know their traveller and have a captive audience but also as they can market offers to them from inspiration through journey preparation to post-travel – and anywhere in between.

Retail systems, by nature, offer powerful product catalogues and the ability to define and combine various products into bundles. They are built to be flexible and cater for almost any product type imaginable, features that translate well for airlines and the importance of consistent product offers across various distribution channels.

Test and adapt, test and adapt

While the term ‘speed to market’ has almost become a worn-down cliché, it remains relevant. Just as important is testing new products and getting results quickly. Many digital retail environments offer the capability to test and evaluate offers on the market. So-called ‘A-B’ or multi-variant testing is extremely important, and can deliver results faster and more credibly than surveys, reviews and customer feedback can.

Appropriate processes and workflows need to be created and adapted. A digital retail environment needs to provide a mature, business rules based workflow and orchestration engine to model not only the product but the related processes as well.

The ability to efficiently implement and test new products and their related delivery processes in the same environment helps airlines identify potential additional revenue sources faster.  Poorly performing and loss making products can also be recognised and rejected quickly.

We don’t know what we don’t know…

…and that is why we need data. Digital retail environments are designed to take data from various sources into account not only during the offer creation but also for other purposes and processes.

The ability to use data for contextual offers is compelling. Airlines collect considerable amounts of data but often, insights are lost as a result of the data flowing between their various systems. Using data to dynamically define the complete offer, including the price of the offer based on various data points, could well be the next step in airline revenue optimisation.

Data is also used for testing and tracking, for sentiment analysis and workflow automation. Enhancements, such as bots, artificial intelligence, self-learning systems and predictive analytics are coming into the world of digital retailing environments, and these rely heavily on data. The more data available, the higher the level of automation which can be achieved.

Further reading

To read more on ‘The Airline’s Transition to a Digital Retail Environment’, click here for the full report.

Here we discuss the challenges faced by the airline as it transitions to a digital retailing environment, the process of transition, and finally, answering the question, ‘do I still need a PSS’?

An Airline’s Transition to a Digital Retail Environment’ is a white paper by Travel in Motion GmbH and sponsored by Datalex.

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NB: This is a viewpoint by Daniel Friedli, managing director and and partner of Travel in Motion, for Datalex. It appears here as part of Tnooz’s sponsored content initiative.

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