Transit Hubs Present Unique Retail Challenges

Transit hubs and airports offer a steady stream of passersby for retailers, but turning those travelers into customers presents a unique challenge.

"I get a lot of walk-bys," says Laura Barton, who for the past 10 years has owned a Westport, Conn., framing shop and art gallery across the street from the town's commuter train station. "People are focused on getting to work, or they're on their way home, tired and want to get to the car. Out of the corner of their eye, maybe they'll notice my shop."

Still, she says her 500-square-foot store now counts 1,500 customers, five times the number she started with.

Draw Customers to Your Window

To catch passersby attention, change the display often, she advises, so people notice something different. Beside framed paintings and sculptures, this spring she added some fresh-cut flowers – daffodils and hyacinths – to brighten up the window. Keeping the door open for Friday night art shows also invites the curious. And a glass of free wine doesn't hurt, she jokes.

At New York's Grand Central Terminal, Pink Slip's display of ruffled boyshorts in spring colors stops people in their tracks, drawing them inside to check out other racier fare.

"Lingerie is very diverse," owner Margo Andros explains, gesturing to a line of lacy bras, panties and other gift items in more than a dozen colors. By the cash register for an impulse purchase is edible underwear.

Appeal to Captive Shoppers

Retailers who target transportation venues also bank on travelers forgetting things and suddenly realizing they need to buy items such as toothpaste or a last-minute anniversary gift. This is particularly true for airports, especially since post-9/11 security measures mean people are in the terminal hours before the plane departs.

"You're already there. You've got idle time and money in your pocket," says Dave Hogan, a senior vice president at the National Retail Federation. "It's extremely profitable, the whole travel retail industry."

Spending by travelers at duty-free shops has jumped nearly 27% since 2001, says Michael Payne, executive director at the International Association of Airport Duty Free Stores. The latest annual data put sales at more than $28 billion, Mr. Payne says, citing research from Generation Group, which tracks industry data.

In New York City's Grand Central Terminal, 70% of the 132,000 square feet of retail space is dedicated to food vendors and restaurants, according to the Metropolitan Transportation Authority's Nancy Marshall, director of Grand Central development.

Most of its vendors are local chains or mom-and-pops, but more national chains have ventured in, hoping to attract spending from the 700,000 people who pass through the station each day. Starbucks has a presence, and recently Penzey's Spices, which replaced a smaller spice shop, Adriana's Caravan.

Watch Trends

The same thing has been happening in Boston's South Station. One of the last independent stores in the station – Boston Coffee Exchange – closed its shop located between two main Amtrak gates in January.

Owners Mort and Bonnie Glovin had been in the 135-square-foot space for 20 years. Their last rent: $9,000 a month. They were able to turn a profit because of their volume – weekly sales of 6,000 cups of coffee on average, bringing in $7,000 to $10,000 a week.

"It's a great location," says the 72-year-old Mr. Glovin, who previously worked in the hotel and food industry. "We would have loved to stay there ad infinitum. But major companies are taking over" the transportation hubs with large contracts, he says. While Starbucks didn't take his former space, it is expected to be the next coffee seller in South Station, Mr. Glovin points out, despite a petition by thousands of customers and Boston Mayor Tom Menino to keep the his shop alive.

Paying attention to commuter input, says Ms. Marshall, will help keep Grand Central in tune with the kinds of shops that succeed in the terminal. "We watch what is working. Tweaking is the key to the future" when leases expire, she says. Among the criteria on whether a shop makes it into Grand Central or stays there: How it fits into the terminal's mix, its creditworthiness, viability and management experience.

All that makes a difference, especially since rents can run up to $225 a square foot, Ms. Marshall confirms.

Many transportation hubs have a vested interest in the success of any retailer, says Pink Slip's Ms. Andros. Beyond rent, "you are in a partnership with the airline or leasing company for revenues. They get a percent of the store sales."

Know When to Expand

Pink Slip's profit margin, on average, runs north of 52%. Sales last year rose 12% to $850,000, making the shop among the top five tenants in the terminal, according to the Small Business Administration. That's a lot of lingerie for a shop of 337 square feet.

Ms. Andros had to lobby for space in the terminal before she signed her lease in 1999. The SBA provided both financing for the shop as well as retail mentor Marvin Rosen through its SCORE (Service Corps of Retired Executives) program. Mr. Rosen helped her come up with a business plan to present to the MTA.

But now it's bursting at the seams.

"We don't have the capacity or space to go any further," she says. "My shop is not a comfortable shop."

Pink Slip has plans to grow, including lobbying for more space at Grand Central. By the end of this year, Ms. Andros hopes to push sales up to $1 million. She also has long-term goals of expanding to other transportation hubs, specifically John F. Kennedy International in New York, New Jersey's Newark Liberty International and Chicago's O'Hare, as well as airports in Dallas-Fort Worth, Atlanta and Miami in coming months.

Men will "pass the window 200 times, but are too scared to come in," Ms. Andros says. But they're "the best customers you can have. They're traveling and they're away from their wives. They want to buy them something. They're already buying perfume. Lingerie is a natural. It's a great fit."

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