19 Jun 2020
Posted in Retail
COVID-19 will strike off US$50bn from the global duty free market in 2020
COVID-19 will cause 2020 global duty free spend to plummet 68.4% (equivalent to US$50bn) versus GlobalData’s pre-crisis market size, declining 65.4% on 2019. While lockdown procedures across the global are gradually being lifted and replaced with social distancing and personal safety measures, the global duty free market will be the last retail channel to see a return in traffic as consumers avoid travel abroad, says GlobalData, a leading data and analytics company.
Honor Strachan, Principal Analyst at GlobalData, comments: “The APAC region will see the largest monetary fallout, losing US$29bn from its original 2020 forecast, with the world’s largest duty free market, South Korea, suffering significantly – largely due to the reliance on Chinese visitors. Travel routes started to reopen between the two markets in mid-May, but these are extremely limited and Beijing’s current second wave of the virus could lead to a temporary closure of China’s travel corridor with Seoul, hindering its recovery further.”
Sales will rebound by 124.0% next year, but spend will only reach two thirds of what was originally forecast for 2021. Passenger numbers will remain lower than 2019 and the weak global economy will restrict what these consumers are willing to spend on discretionary goods. Moreover, longer processes and checks at airports will limit the time consumers have traditionally spent browsing retail, while necessary changes to promotional strategies, product displays and space allocation are likely to impede operator and brand sales densities.
Strachan continues: “As the largest channel, airports will suffer the greatest revenue losses, but the cruise duty free market will see the steepest percentage decline in 2020 and have the slowest recovery. It will take time to restore consumer confidence in booking cruise holidays, with operators postponing the commencement of schedules due to weak demand and port closures. A vaccine against coronavirus will be essential in returning the cruise market to the high growth it was experiencing before the pandemic.”