Travel Technology
How tax free refunds can be an accelerator for the duty free business
In this contributed column, travel technology company utu issues a strong message that millions of dollars in refunds from tax free shopping could be used in duty free.
The travel industry, for so long hindered by the impact of the pandemic, is now rebounding quickly. Among the leading innovators in this resurgence is utu, which has set its sights on transforming the travel retail experience.
Its approach links the world of refunds with duty free stores, channelling VAT refunds into additional sales for duty free operators. Typically, VAT refunds are processed at airports in cash or to credit cards, and are consumed by tourists back in their home countries. But utu’s technology allows tourists to receive more of their VAT refund money if they spend it in duty free stores before departing. This provides an enriching end-of-trip experience for travellers and drives additional revenue for duty free operators, it says.
VAT refunds are the result of tax free shopping schemes, introduced by governments to incentivise not only shopping but travel itself. Refunds attract tourists with shopping intentions to particular locations, and their stay benefits other businesses, thereby maximising tourism sales.
However, travellers have traditionally only managed to reclaim a portion of the taxes paid on their purchases due to the high cost of refunding. With utu, travellers are empowered to reclaim a much higher value, in many cases up to 100% or more of the value of the actual VAT spent. This comes with a twist – in the form of a utu Privilege benefit delivered on the utu app which can be spent again on shopping at duty free outlets before their flight.
utu views duty free as a final shopping opportunity to recycle VAT refund money within the country. Travellers will still have to go through the usual tax free shopping process with existing VAT Refund Operators (VROs). utu positions itself as an upselling tool for retailers, allowing shoppers to get more value from their VAT refunds when they spend them at stores partnered with utu. The utu Privileges proposition is firmly placed in the company’s new marketing positioning of ‘Get More’.
"What we are is a new niche within the travel ecosystem that brings exponential value to our end customer – the tourist. We want to take the entire travel retail pie and supersize it. We're a rewards company, not a refund company." – utu Co-Founder and utu Privileges Chief Commercial Officer Ameer Jumabhoy
The way in which utu delivers value is by merging its experience across the worlds of VAT refunding, duty free sales and fintech.
utu CEO Asad Jumabhoy is a well-known industry figure, having previously founded the Scotts Weitnauer Group in Singapore, helped to build tax free shopping giant Global Blue and played a pivotal role in modernising and growing Planet, the other major VAT Refund Operator (VRO). His experience in duty free retail and the VAT refund space have been pivotal in delivering utu’s VAT business model transformation.
Ameer Jumabhoy, Co-Founder of utu, and Chief Commercial Officer of utu Privileges, says: “The vast majority of travellers engaging in tax free shopping arrive by air. This naturally places duty free stores in an ideal position to take advantage of utu’s travel tech offering while benefiting from transforming refunds into sales across all their outlets. What better way to respond to the VAT refund incentive than to recycle the VAT refunded into sales.”
The implications of channelling even a fraction of these refunds into airport retail via utu Privileges are substantial. Historically, tax free and duty free shopping have mostly been disconnected (save for the odd promotion), left to compete for the tourist dollar. The rise of tax free shopping downtown, in high streets and malls, was seen as a leakage for airport sales. Utu says it is focused on changing that paradigm into one of aligned interests for the two sectors and of enhanced interconnectedness in the traveller’s shopping journey.
“We are not a VRO like Global Blue,” clarifies Jumabhoy. “We don’t handle any component of the tax refund process. What we are is a new niche within the travel ecosystem that brings exponential value to our end customer – the tourist. We want to take the entire travel retail pie and supersize it. We’re a rewards company, not a refund company. Our involvement begins where that of the VRO ends.”
He adds: “We are connecting seemingly disparate sectors at scale to create value, and in completely new ways that have never been explored in the past. For instance, giving tourists the choice to receive more of their refund value earned off-airport to be spent on-airport retail properties. The beauty of the business model is that it is not a disruption play – in fact, it’s a rewards play and every stakeholder in the tourist’s shopping journey is better off.”
Further exciting projects are in the works. Earlier this year, the company announced a US$33 million Series B and the acquisition of fintech start-up CardsPal to accelerate its global expansion.
The next six months are set to witness utu’s collaboration with major duty free operators across numerous geographies. These initiatives will include marketing activities that incentivise the spending of utu Privileges at airports. utu’s rewards portfolio includes Airmiles and Hotel upsizing VAT refunds, with 14 major airlines and the Accor group.
*utu will attend the TFWA World Exhibition in Cannes in the coming week as it seeks to foster deeper relationships within the duty free sector.
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The Moodie Davitt eZine
Issue 327 | 29 September 2023
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