You may have heard of the huge flood of Chinese outbound travelers, but do you how they are spending their money at duty-free retailers? Read on to get up to speed and get on top of this fast-growing retail channel.
China’s outbound tourism boom isn’t new news. In 2018, the number of Chinese outbound trips increased around 15% to reach 150 million. This amounts to USD 120 billion of expenditure, according to figures compiled by the China Duty Free Group.
As tourist operators, tourism destinations and brands jostle for position to capture Chinese outbound tourism expenditure, airport and port retail emerges as a critical sales channel. According to Accenture data, 84% of Chinese outbound travelers buy at airport retailers or on flights, compared to 67% of international travelers. That makes this channel a critical battleground.
Indeed, although China Tourism Academy figures show that shopping’s proportion of outbound tourist expenditure is shrinking, expenditure in duty-free outlets remains robust. The China Duty Free Group, China’s largest duty-free retailer, estimates the industry grew by 27% between 2017 and 2018. Morgan Stanley projects that the sector will quadruple by 2025, and China’s outbound tourists will account for a third of worldwide duty-free spend.
With this growth in mind, what should brands and retailers be thinking of as they expand and operate their airport and duty-free presences?
Key Take Aways
Here are a few considerations we’ve taken away from the China Duty Free Group’s own strategy:
- Get Exclusive: drive demand by having a greater array of limited-edition products, value packs and duty-free exclusives.
- Incentivize Online Pre-Purchase: offer exclusive discounts for online order and offline pick-up.
- Partner Up: China Duty Free Group has partnered with Alibaba and its travel platform Fliggy to launch a new service that allows Chinese travelers to shop online at duty-free.
- Cross-Refer: Integrate with travel platforms, content platforms and partner retailers to offer benefits between loyalty programs.
- New Experiences For Long Layovers: target travelers with significant layovers, offering value-added services (e.x.: VIP longue and shuttle buses) and access to in-airport tastings or demonstrations.
In total, what these measures amount to is stoking and unlocking demand. That’s critical for airport retailers. Changes to duty-free retail mean that tax-free shopping is no longer limited to in-flight shopping, airports, and cruise ships. Tourist-oriented retailers have tax-free exemptions and destinations are working hard to make the tax refund process as frictionless as possible.
In order to hold onto their privileged positions within Chinese travelers’ minds and wallets, brands with airport presences and duty-free retailers must adapt, leveraging product, price and promotions to stoke and amplify demand.