Finding new revenue streams crucial for APAC duty-free market, says GlobalData

In a bid to revive the Asia-Pacific (APAC) duty-free market from the negative impact of the COVID-19 pandemic, the Asian countries are exploring several revenue streams. With international tourist arrivals to APAC not expected to reach the pre-COVID-19 levels until at least 2023, finding new revenue streams, especially from Chinese customers, is crucial for APAC duty-free market, says GlobalData, a leading data and analytics company.

Despite COVID-19, China’s travel retail was able to recover quickly due to favorable duty-free shopping policies introduced in Hainan. After the Chinese government removed all purchase caps and tripled the annual limit on duty-free purchases in Hainan Province to CNY100,000 (US$15,500) per person, China Duty-Free Group (operating offshore duty-free stores in Hainan) recorded a remarkable growth of 127% during Q1 2021.

Similarly, Dufry in collaboration with Hainan Development Holdings, a fully state-owned company of the Hainan Provincial Government, opened a 38,920 m2 downtown duty-free shop at the Mova Mall in Haikou to tap the potential in Hainan’s travel retail market.

Vijay Bhupathiraju, Retail Analyst at GlobalData, comments: “As demand for high-end luxury products continues, China’s decision to designate Hainan Island as a free trade port is a blessing for duty-free retailers, who would have been struggling otherwise with significantly fewer international tourist arrivals. The move to take advantage of the ongoing restrictions and convert the domestic demand into offshore duty-free sales is beneficial to China’s duty-free industry.

“Amid the ongoing restrictions and closed borders, cross border logistics and smooth functioning of supply chain becomes the major challenge to fulfil demand. With Cainiao’s enhanced logistics services and technology, long transit times will be eliminated, and imported goods will reach Hainan within a few hours, making new stocks available for shoppers at an elevated frequency. Such services are also crucial in promoting the multilateral trade during the crisis.”

Another Asian country South Korea has come up with an innovative approach to aid the struggling duty-free players and airlines in the country. In November 2020, the government announced plans to allow non-destination flights (touch international airspace but does not land, returns to South Korea) to taxi passengers for 12 months and the same duty-free shopping allowance was allowed for passengers to buy as in normal international flights.

Mr. Bhupathiraju concludes: “As international travel has come to a standstill on the back of COVID-19 pandemic, the sales prospects of duty-free retailers across the region have nullified. These aforementioned initiatives from local governments will help duty-free players to remain afloat during these testing times and bring back lost sales to some extent.”

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