Page 35 - Bloomberg Businessweek-October 29, 2018

◼ BUSINESS Bloomberg Businessweek October 29, 2018

instant gratification, merchandising, employee
service, and dressing rooms to get shoppers to buy First Class Wings Its Way
more and return fewer items, which boosts profits. Back Into Style
Alexa Buckley, who co-founded women’s shoe pur-
veyor Margaux, figured out the merits of stores when
she rented a loft space in Philadelphia for one night
in 2015. Despite heavy rains and wind from the rem- ● After years of cutting super-premium options,
nants of a hurricane, 200 women showed up and airlines are reintroducing them on many routes
generated almost a month’s worth of sales. “It was
the craziest three hours of my life,” Buckley recalls.
“It was like nothing we could have anticipated, in First-class airline service has long been the play-
terms of the appetite for this offline experience.” ground of the fabulously famous and fantastically
Margaux tested temporary stores in cities wealthy, with luxuries ranging from free-flowing
including Atlanta, Boston, and Dallas and got the Champagne and mountains of caviar in the early
same results. Some customers needed to try the years to private cabins with a bed and shower
shoes on in person before committing to that first on some carriers today. But after British Airways
purchase, and offline shoppers spent more (the in 2000 introduced lie-flat seats in business class
spread is 13 percent) and returned less. In July, for thousands of dollars less than first—an innova- ● First-class seats
offered
Margaux opened a permanent store in Manhattan’s tion that quickly spread throughout the industry—it ◼ 2008
Greenwich Village, and it plans more. “It is a cus- was hard to argue that it’s worth the extra cash for a ◼ 2018
tomer acquisition necessity for us,” Buckley says. few more inches of legroom and a better wine list.
“We’re finding that continually in city after city.” Bookings started to fall sharply as the 2008 finan- Emirates
Going offline marked the moment Untuckit took cial crisis curbed corporate spending and made 623k
off. By late 2015 the company had already become public displays of wealth unfashionable, so over British Airways
an aggressive advertiser online and via traditional the past decade scores of airlines have ripped out

20 means such as print and radio, but the effect of some or all of their cushiest and priciest seats. Lufthansa
all that marketing multiplied when it opened a Carriers today say they may have cut too far,
pop-up in Manhattan. Profit margins were better, especially as the ranks of the super rich continue Singapore
too, because it didn’t have to pay for shipping or as to expand and the stigma attached to conspicuous
many returns. Plus, offline customers bought more, consumption has faded. With the global economy Cathay Pacific
and there was a noticeable lift in the surround- back in growth mode and the industry coming off
ing area’s online sales after the store’s opening. of three straight years of fat profits, airlines are Air France
Following that success, Kleiner Perkins, an early reintroducing or revamping first-class cabins at a
backer of Amazon.com Inc., invested $30 million cost that can exceed $100,000 just to manufacture Qantas
in Untuckit so it could open more stores. “Stores each seat. Long-haul airlines say charging more 59k
took us to a different level,” says Riccobono, the than $10,000 for a round-trip ticket in the pre-
founder. “Customers who didn’t want to buy a mium cabin is a profitable way to stand out in an
$98 shirt because they weren’t sure if we’re just industry that’s come to be dominated by discount-
another fly-by-night e-comm company started tak- ers. “First class is developing better than we’d
ing us very seriously.” imagined three or four years back,” Lufthansa
Bonobos’s “guide shops” are set up for custom- Chief Executive Officer Carsten Spohr told staff in
ers to try on and order clothes (there are samples, a recent briefing. “We’re looking at routes where
but no inventory) and have become as important
to the marketing mix as glossy catalogs and TV
commercials. The company focuses not on sales World’s Busiest Routes for First-Class Travel
per square foot—a traditional retail metric—but on PHOTOGRAPH: COURTESY AIRFRANCE. DATA: OAG; SEATS ARE ON FLIGHTS LONGER THAN 3,000 NAUTICAL MILES
how much the stores contribute to sales online in
a particular market. It found that new customers London
who visit its stores typically spend 20 percent more
than they would if they were starting their expe- New York Paris
rience online. CEO Onvural likens each store to a San Francisco Tel Aviv
“ ginormous billboard.” �Matthew Townsend Los Angeles Dubai
Abu Dhabi Hong Kong
THE BOTTOM LINE Because about 90¢ of every retail dollar in
the U.S. is still spent in a brick-and-mortar store, online merchants
are increasingly opening physical locations to expand their brands. DATA: ICF Singapore