Rise in consumer demand to help APAC duty-free retail market reach pre-pandemic levels in 2023, forecasts GlobalData

Asia-Pacific (APAC) remains the fastest growing and the largest market for duty-free retail products accounting for 60% of the global duty-free sales in 2020. It is expected to cross pre-COVID-19 levels in 2023 as normalcy returns to the market and customer demand picks up, finds GlobalData, a leading data and analytics company.

The APAC region registered a decline of 70.1% during 2019-2020, trailing behind the Americas and the Middle Eastern & African region. A significant drop in sales in the top Asian duty-free markets such as South Korea, Thailand, Japan and Singapore can be attributed to the overall contraction of the APAC duty-free market.

Ankita Roy, Retail Analyst at GlobalData, comments: “In 2020, the Chinese duty-free market managed to show great resilience towards the pandemic and registered the smallest y-o-y sales drop of 4.8% during 2019-20 before it returned to growth (66.8%) in 2021.

“This can be attributed to the recovering tourism and duty-free initiatives at Hainan province that managed to compensate for lost sales elsewhere in the country. Duty-free retailers in the region can leverage the strong interest and purchasing power of consumers through both domestic and international travel retail to  set the path to recovery.”

The government initiatives to help duty-free players (such as China Duty-Free) in China enabled it to become the obvious winner in the APAC duty-free landscape. Chine Duty Free survived the COVID-19 crisis with 8.2% sales increase during 2019-20, whereas other retailers registered a significant decline in sales during the pandemic.

Roy continues: “China remains a force to reckon with when it comes to dealing with COVID-19 pandemic induced travel restrictions and successfully steering its duty-free market out of the near-death situation. To highlight, on the back of COVID-19 induced travel restrictions, almost all Asian countries registered a steep drop in their sales figures in 2020, whereas China remained the only country in the region to weather the crisis to a large extent due to favorable government policies and revenge spending of Chinese consumers.”

In 2020, China overtook South Korea, the largest duty-free market in 2019, with Chinese duty-free sales valued at US$6,996m in 2020 and with an expected CAGR of 17.4% during 2019-2025.

Roy concludes: “The macro-economic factors in South Korea such as COVID-19 induced travel restrictions and recent trade war and political tensions with Japan and China have resulted in fewer tourist arrivals from these nations in recent past. However, South Korea had produced an innovative approach to aid struggling duty-free players and airlines in the country, with the launch of non-destination flights. This will provide some relief to the South Korean duty-free market. However, the sales are not expected to return to pre-COVID-19 levels by 2024. Other leading duty-free markets in the region such as Thailand, Japan and India will return to growth from 2022 contributing to the recovery of global duty-free sales.”

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