“Captivity and impulse,” says Tom Douramakos, president and CEO of the Toronto-based company GuestLogix, providers of onboard retail systems to airlines, trains and high-speed ferries. “Those are the two things we're trying to capture.”
According to Mr. Douramakos, there are close to three billion passenger trips in the world annually just for airlines and 21 billion for trains – mainly in Europe, India and China – with enormous potential for retail sales, possibly “in the trillions of how much merchandise could be done in this onboard marketplace.”
The idea for GuestLogix started in 2002 when Mr. Douramakos – sitting in the back of a plane wondering whether the flight attendants would run out of beef before they got to him – had a vision of creating a technology engine to personalize all the products and services that an airline gives or sells onboard.
The timing was right. By 2003, cash-strapped airlines had started charging fees for previously free items such as beverages and aisle seats. By 2005, much of the retail software that GuestLogix offers today was ready, just as the airlines, further beset by high fuel costs and competitive seat sales, needed more revenue streams to survive.
The company provides point-of-sale devices and software that enable onboard attendants to sell things such as Broadway or Disney theme park tickets, limo vouchers and train tickets as well as food and drinks. The core of the technology is always the same, including the handheld cash register units that they designed and now build in Korea, but which are customized for each client. The attendants can print vouchers with barcodes so passengers can prepay their transportation connections or destination entertainment while sitting in their seats.
With an average flight time of 31/2 hours, trapped passengers have plenty of time to shop. Plus there's the convenience of prepaying, avoiding future lineups and the relative security of handing your credit card to the airline rather than a taxi driver in an unknown city. Consumer reaction has been mixed, with some passengers annoyed about paying for goods and services that used to be provided without charge. Currently only one in 10 flight passengers makes an average purchase of about $12, although sales are growing steadily.
“It's changing, but it took a while for that mind shift to happen,” Mr. Douramakos says. “When people get on a plane [now], they don't expect to get anything for free any more.”
In addition to managing the onboard virtual store, the software can analyze the product mix, look at what's selling and not selling and allow for promotions. For example, if meals are unsold halfway through the flight, the airline can discount them since it costs more to keep them and throw them away at the end of the journey. The software is also FAA certified so there's no conflict with an aircraft's technology.
“We transmit all the data after, not during, the flight,” Mr. Douramakos says. “Our technology is approved to be on the planes.”
The biggest challenge at the start was finding enough money to develop the product, says Mr. Douramakos, who largely financed the venture with support from partners, friends and family. Their first client was Air Canada followed by American Airlines.
“We built it, but we weren't sure it would work until American Airlines – and Air Canada in the beginning – used it,” Mr. Douramakos says. “After that, from mid-2006 to today, we've taken more than 35 per cent of the world traffic in airlines and over 90 per cent of the North American airlines. So if you travel with American, Delta, Southwest, United or U.S. Airways, our retail technology is onboard.”
One challenge the company is still working on is convincing unionized flight attendants, with no sales experience and whose major focus is passenger safety, to become sales people. “At the end of the day, the only way that the airline industry can survive is to make more money by what they're selling onboard,” Mr. Douramakos says. “The price of a ticket can't go up any more.”
What's next?
“Our new On-Touch technology platform is going to move us into the next generation where we can create a virtual store with shelves, with each shelf offering different products,” Mr. Douramakos explains. “The product service provider can come into the store and interact with the consumer, or the consumer can do self-service using their iPod, BlackBerry or laptop, rather than having to use the handheld device onboard. But the airline will still be able to know what they are doing and take a percentage of every sale that the consumer does onboard.”
