China – A case study for the revival of duty free shopping

In 2019 there were 4.54 billion scheduled passengers worldwide. Analysts expected 2020 to set a new record of over 4.72 billion passengers, but instead, the coronavirus pandemic spread its tentacles across the globe, practically bringing international travel to a standstill.

Airports Council International (ACI) estimates that around 50% of passenger traffic will be lost in 2020. As a direct relationship exists between passenger numbers and airport revenue, the ACI predicts that over the year, the airport retail market will also drop by over half in some regions. Dufry, the world’s biggest airport retailer, reported that April 2020’s sales had dropped by 94% compared to the previous April.

How can this situation be salvaged? Some experts suggest a heavier investment in ecommerce by airports and travel retail brands; others suggest looking at innovation and data to zero in on your target market.

“The pressure to make the right decision can be felt across the industry. Companies can’t afford to sit on their laurels, to wait it out. They need to look at facts to overcome fear. Re-think their strategies as the travel trends move from international to domestic and regional,” says Jerome Goldberg, Retail & Travel Retail Customer Success Manager at ForwardKeys.

New opportunities

A Coresight report says that shoppers have around 56 minutes of free time before boarding so spend around 25 minutes shopping at duty free stores. Watches, jewellery, and fashion are the most popular as prices are duty-free and “typically lower than in regular retail stores”. Also, having a range of products that can be purchased, collected and delivered is more likely to boost spend per passenger.

With this in mind and the shift in shopper profile, some are now able to capitalise on new business opportunities, even during this crisis.

“The latest data we are seeing from China using our Chinese Shopper Tracker, paints a very promising picture,” adds Goldberg.

“When looking at who is currently shopping in Hainan, we’ve noticed key differences in the age brackets and key origin cities from Mainland China compared to near-by destinations.”

Indeed, the data reflects the attraction of the tropical shores of Sanya, rising since the new duty free allowances were introduced on 1 July.

Spending by age in Hainan and in Macao (2020)

Speinding dates from January to August 2020

Source: ForwardKeys Chinese Shopper Tracker.

Not only is the average traveller leaning slowly more towards a much younger audience, but the biggest spenders and luxury brand lovers stem from Shanghai, long known as the fashionistas of China. This presents an exciting opportunity for fashion and beauty segments in the travel retail industry.

All eyes on China

When comparing year-on-year trends in China, the power of Shenzhen shopping might needs to be recognised as an extra chance for travel retailers to widen their shopping cart.

Average duty free spending per day in China (US$)

Speinding dates from July to August 2020

Source: ForwardKeys Chinese Shopper Tracker.

Not only is the data showing an increase in the cost per transaction, but there has been an increase in the number of transactions. Could that also be down to the fact that there is a growing number of consumers who are now also visiting duty free stores more than once per week?

Duty free shopping frequency in Hainan

Speinding dates from July to August 2020

Source: ForwardKeys Chinese Shopper Tracker.

The shopping boom that has transpired in domestic China has had a helping hand from a few other things such as an increase in seat capacity, discounted airfares, and greater control of Covid-19. These are lessons that other nations should work towards if they would like to restart movement in their travel retail sectors.

*ForwardKeys has been supporting the travel retail and brands industry with the most comprehensive flight data since 2010. The new addition of China Spend Data through the Chinese Shopper Tracker will create a more robust representation of the current travel and tourism picture. Learn more and visit: https://forwardkeys.com/chinese-shopper-tracker/