After being decimated by the Covid-19 pandemic in 2019-20, Asia-Pacific’s duty-free market will bounce back in 2023 according to research from data analytics company GlobalData.
Last year (2020), Asia accounted for 60 per cent of the world’s duty-free sales, despite a 70.1-per-cent decline in sales after the advent of Covid-19. The decline was driven by markets such as South Korea, Thailand, Japan and Singapore.
“In 2020, the Chinese duty-free market managed to show great resilience towards the pandemic and registered the smallest year-on-year sales drop of 4.8 per cent during 2019-20 before it returned to growth (66.8 per cent) in 2021,” said Ankita Roy, retail analyst at GlobalData.
“This can be attributed to the recovering tourism and duty-free initiatives at Hainan province that managed to compensate for lost sales elsewhere in the country. Duty-free retailers in the region can leverage the strong interest and purchasing power of consumers through both domestic and international travel retail to set the path to recovery.”
She said that government initiatives to help duty-free players (such as China Duty-Free) in China enabled it to become the obvious winner in the APAC duty-free landscape. Chine Duty Free survived the Covid-19 crisis with an 8.2-per-cent sales increase during 2019-20, while other retailers were registering a significant decline in sales during the pandemic.
“China remains a force to reckon with when it comes to dealing with Covid-19 pandemic-induced travel restrictions and successfully steering its duty-free market out of the near-death situation. To highlight, on the back of Covid-19 induced travel restrictions, almost all Asian countries registered a steep drop in their sales figures in 2020, whereas China remained the only country in the region to weather the crisis to a large extent due to favorable government policies and revenge spending of Chinese consumers.”
GlobalData is predicting the Asia region to surpass pre-Covid-19 levels in 2023 as normalcy returns to the market and customer demand picks up.
Last year, China overtook South Korea, the largest duty-free market in 2019, with Chinese duty-free sales valued at US$6.996 billion last year and an expected CAGR of 17.4 per cent during 2019 to 2025.
“The macro-economic factors in South Korea such as Covid-19-induced travel restrictions and recent trade war and political tensions with Japan and China have resulted in fewer tourist arrivals from these nations in recent past,” said Roy.
“However, South Korea had produced an innovative approach to aid struggling duty-free players and airlines in the country, with the launch of non-destination flights. This will provide some relief to the South Korean duty-free market. However, the sales are not expected to return to pre-Covid-19 levels by 2024. Other leading duty-free markets in the region such as Thailand, Japan and India will return to growth from 2022 contributing to the recovery of global duty-free sales.”