Chinese consumers most important source of demand for duty-free shopping at home and abroad, Euromonitor says
- Factors such as the removal of travel restrictions in Asia-Pacific and the recent reopening of China bode well for duty-free shopping, study says
- Beijing, Shanghai, Guangzhou, Tianjin and Chonqin also likely to become duty-free zones after being named international consumer centres in 2021
China will be the leading source market for top duty-free destinations in Australia, South Korea, Japan, Hong Kong, Taiwan and Singapore by 2027, according to the latest study by Euromonitor. In other top-12 duty-free markets India, New Zealand, Switzerland, Israel, the United Arab Emirates and Norway, the top sources will be the United States, Australia, India and Sweden.
In New Zealand, China will be the second most important source market, while in Switzerland, Chinese consumers will be in third place.
“Global [duty-free sales] are forecast to reach US$117 billion at constant 2022 prices in 2023,” the study said. “The success of global duty-free sales is intrinsically linked to tourism flows, and travel is back and powering forward, as even regions slow off the mark, like Asia-Pacific, are moving into full recovery, with the removal of travel restrictions and the recent reopening of China, which bodes well for duty-free [shopping].”
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This year, Chinese travellers are expected to spend an average of US$230 per trip, more than double the average US$110 they spent in 2019, the study said. By 2027, China is expected to account for US$18 billion or a quarter of all inbound duty-free sales globally.
“By 2027, overall spending on duty-free [shopping] – international and domestic combined – is forecast to reach US$168 billion, 15 per cent above its pre-crisis levels, with a return to 2019 levels expected by 2025,” the report said. “This amounts to incremental growth of US$51 billion” over the 2023 to 2027 period.
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Duty-free sales are defined as sales to travellers of goods and products that are exempt from duties and taxes such as sales taxes or value-added tax (VAT), through duty-free shops in travel locations. The Euromonitor study covered data from country borders such as airports and ports, shops on cruises and ships, and dedicated downtown duty-free stores.
Duty-free sales also include VAT-reclaim sales offered by high-street and mainstream retailers. Typical products sold include luxury products, tobacco, alcoholic drinks and perfumes, but are not restricted to these items.
The Euromonitor study also cautioned duty-free operators and destinations against relying solely on Chinese spending, given that Beijing might change its policies regarding consumer spending on luxury goods.
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In 2020, for example, with China seeking to bolster Hainan as a shopping paradise, the Hainan government increased duty-free quotas from 30,000 yuan (US$4, 362) to 100,000 yuan per person each year, and expanded the tax-free goods category to include electronic products and wines.
This was seen to directly impact Chinese consumers’ spending with South Korean duty-free operators. It led to lower revenues for duty-free giants such as Lotte Duty Free, Shilla Duty Free and Shinsegae Duty Free, with their sales falling by nearly half the same year. These operators have since then struggled to recover to pre-Covid-19 levels, despite South Korea’s border reopening in early 2022, said Prudence Lai, senior research analyst at Euromonitor.
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Five other cities – Beijing, Shanghai, Guangzhou, Tianjin and Chonqin – are also likely to become duty-free zones after being named international consumer centres in 2021.
“However, it is important to note that the plans to nurture domestic duty-free [shopping] are solely dependent on government direction and policies with the aim to boost domestic demand, and can be subject to changes.”
