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China, South Korea’s support of duty-free retail “a blessing”: GlobalData

With international tourism not expected to return to pre-Covid levels until at least 2023 across APAC, duty-free retailers around the region are exploring new revenue streams in an effort to keep the industry going.

According to GlobalData retail analyst Vijay Bhupathiraju, finding new revenue streams, especially from Chinese customers, is crucial for the duty-free market – and the Chinese and South Korean governments have set a strong example for other leaders in the region to follow.

For example, after the Chinese Government removed all purchase caps and tripled the annual limit on duty-free purchases in the Hainan Province to CNY100,000 per person, the province’s duty-free operator, China Duty-Free Group, recorded growth of 127 per cent during Q1 2021.

“As demand for high-end luxury products continues, China’s decision to designate Hainan Island as a free trade port is a blessing for duty-free retailers who would have been struggling otherwise with significantly fewer international tourist arrivals,” Bhupathiraju said.

“The move to take advantage of the ongoing restrictions and convert the domestic demand into offshore duty-free sales is beneficial to China’s duty-free industry.”

South Korea’s efforts were also to be applauded, said Bhupathiraju.

The South Korean government has instigated a ‘no destination’ flight path, where customers can book onto flights that take them up into international airspace and back to South Korea, which allow shoppers the same duty-free allowances as is allowed in ‘normal’ international flights.

This way, shoppers can continue getting duty-free deals, duty-free retailers can keep making sales, and international airlines can keep flying.

“As international travel has come to a standstill on the back of Covid-19 pandemic, the sales prospects of duty-free retailers across the region have nullified,” said Bhupathiraju.

“These aforementioned initiatives from local governments will help duty-free players to remain afloat during these testing times and bring back lost sales to some extent.”

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