Recovery in duty-free sales sector forecast to be 18 months away

PUBLISHED : Friday, 15 May, 1998, 12:00am
UPDATED : Friday, 15 May, 1998, 12:00am

Duty-free sales in Hong Kong are expected to take up to 18 months to recover from their present slump, according to operators hard hit by the Asian economic crisis.

Ray Martin, vice-president of Tax Free World Association, yesterday said that Hong Kong's tax-free business reached a peak in 1996 and had since declined.

'I don't believe Hong Kong will see an upturn in business to reach the levels in 1996 for 12-18 months,' he said.

Hong Kong ranked number one in Asia for duty free sales totalling US$830 million in 1996, with Kai Tak airport generating US$380 million.

Mr Martin said the duty free market had suffered from a drop in the biggest spending group - Japanese tourists - whose spending had dropped by 62 per cent to 70 per cent this year.

He said all duty free operators had complained of a downturn.

Duty Free Shoppers Hong Kong (DFS), the biggest operator in the SAR, reported a loss for the year to March - its first negative showing since it was set up 38 years ago.

DFS has laid off 320 staff and shut down three shops in Hong Kong this year.

Mr Martin said while his association had spent HK$20 million, or 50 per cent more, on this year's Tax Free Asia Pacific conference at the Hong Kong Conference and Exhibition Centre than it did in Singapore last year and there were 13 per cent more exhibitors, the number of visitors had dropped by about 15 per cent.

He said exhibitors had also sent fewer representatives.

'The aisles are looking extremely empty,' Mr Martin said.

However, he said the duty free market in Asia remained the fastest growing in the world representing 30 per cent of the industry's worldwide sales of US$21 billion last year.

Mr Martin said duty free retailers were pushing to tap the fast-growing mainland market which is monopolised by the government's China National Duty Free Merchandise Corp.

He said although foreign duty free retailers were not allowed to open outlets on the mainland, Chinese duty free shops were amenable to selling international brands.