Music In The Air

Nation's Business, Sept, 1998 by Michael Barrier

Airport retailing isn't the same as ordinary retailing, though- at least not yet. For one thing, not many malls require their customers to pass through metal detectors.

To get the hang of the differences, we talked recently with Amy Nye Wolf, the 30-year-old proprietor of a chain of airport stores called AltiTunes. Wolf, who started her business four years ago, had 12 stores open when we talked to her, and she was planning to open nine more by year's end. She started with stores at New York-area airports, and she has since expanded to Washington, Baltimore, Orlando, Fla., Memphis, Term., and Boston. among others.

AltiTunes sells compact discs and cassettes (the latter now account for less than 10 percent of its sales) at kiosks that are closer in appearance to traditional newsstands than to the CD stores in malls. Despite the growing number of portable CD players you see on planes, you'll have trouble finding a full-scale CD store in an airport-and, Wolf says, that's no accident.

"When you come up with an idea for a business," she says, "the first thing you ask yourself is, why hasn't anybody else done this?" The answer, she says, is that "music is a very low-margin business. Airports are very expensive, and the way that they structure their rent is typically as a percentage of your sales. They're used to working with gift operators, who make a 50 percent or better margin. We're lucky if we get 35."

That's why she turned to the kiosk format: "To build a kiosk and staff a kiosk and put inventory into a kiosk requires a lot less capital and overhead" than a conventional store.

The kiosk's small size limits her stock, of course, but she works with a distributor that can restock her stores overnight, "which is great for your cash flow."

Surprisingly, perhaps, there's not a lot of variation from airport to airport in what people buy "In New York, we do a lot of business with Broadway show tunes," she says. "Down South, it's more country and gospel. But when you're in an airport, you're not dealing with people just from that area. You're dealing with a lot of out-of-towners."

Wolf believes that fewer than half the CDs sold at AltiTunes are being bought so passengers can listen to them on the planes. Here, she suggests, is where airport retailing and shopping-mall retailing really are converging: More and more customers are making purchases at the airport that they might have made at a more traditional store.

What's involved for retailers in getting into airports? "Patience," Wolf says.

"Even four years ago, when I started," she says, "the idea of plunking a kiosk down against a blank wall was fairly novel. Now a lot of airports are open to that idea." On the other hand, "there are still some that think they're there just to put people on a plane and get them out of there."

A firm like hers can benefit, though, when an airport is dragging its feet in that way. "I personally prefer the situations where there's less retail," she says. 'They tend to be less expensive to get into, and I have much less competition for time and money If it's just us and a generic souvenir shop, we're much more attractive."

The peculiarities of airport retailing are such, Wolf believes, that she probably will never have much competition from big retailers like Tower Records. Big retailers are accustomed to getting their way in the malls that they anchor, she says, but in airports, they have to take second place to other concerns (think again about those metal detectors).

AltiTunes has thus found what looks like a pretty secure niche within a niche market; but success, as every successful small-business person knows, can bring its own problems.

There's the matter of AltiTunes' name, for example. As fitting as it may be for airport-based kiosks, it really doesn't work for New York City's Grand Central Terminal, where a kiosk was scheduled to open in late August. Its name: "Train Tracks."