INTERNATIONAL. Tax free shopping sales decreased -18% in Europe in June, but there was +4% year-on-year growth in Asia during the month. Overall sales value grew by a modest +2-3%, according to the latest data from retail intelligence company Global Blue.
The decline in Europe was even steeper than the -12% recorded in May, but Global Blue said the performance should be seen in the context of an exceptionally strong performance in June 2015, where sales progression was +49%.
A -12% drop in the number of transactions largely drove the decrease in European sales, along with a -7% fall in average spend per transaction.
“The shrinking spend of Chinese globe shoppers, coupled with a lack of Middle East sales due to the earlier start of Ramadan, are combining to drive down this month’s tax free shopping performance in the region,” Global Blue stated.
In the first half of 2016, Chinese tax free shopping sales across the region were down -22%, while transactions dropped -9%. Global Blue said performance was improving until June “when their preferred destination hotels in France became fully booked due to the tourism activity for football’s Euro 2016 championship”.
Global Blue also noted evidence that a new type of “less affluent but enthusiastic” Chinese globe shopper was emerging. “While headwinds such as the threat of terrorism in Europe or over-zealous customs checks at Chinese airports are deterring traditional High Net Worth Individuals (HNWIs), new travellers from second-tier and third-tier cities in China are replacing last year’s high spenders,” it said. “A key driver for this trend is tour operators, who still need to fill pre-booked tour packages and have been reducing the cost of European trips from CNY20,000 (US$3,019) to CNY8,000 (US$1,208), according to Global Blue sources.”
Middle Eastern sales declined -1% with transactions flat, but Russian sales were down -23% and transactions fell -24%. The continued weak currency was cited as a major factor. US sales were down -1% but transactions increased +3%, thanks to more favourable exchange rates in the UK and the Eurozone.
Europe’s number of tax free shopping transactions continued to be affected by the lack of positive foreign exchange drivers compared with last year, when globe shoppers travelled and spent more due to favourable exchange rates.
France and northern Europe are suffering more than the rest of the continent because of the continued threat of terrorist attacks, exacerbated by the Nice incident in July, Global Blue said. France and Germany posted the highest sales decline (-18%), with the company noting that the two countries are often on the same tour itineraries.
Growth in Asia
Asia’s +4% sales growth in June reversed the -1% decline of the previous month. This was supported by a significant rise in the number of arrivals and a lower base comparison for June 2015, Global Blue said.
The increase in visitor numbers translated into a rise in transactions for June, with Asia seeing a +50% spike in tax free forms issued. However, the new type of less affluent value-driven globe shoppers are driving down average spend, which was -31% for June.
The year-to-date performance was dominated by Chinese, who comprise 53% of sales share in the region. Overall, the regional sales performance for the first half of the year was up +3%, with transactions also up +28%, but average transaction value was down -19%.
In the first half of 2016 Chinese globe shoppers helped to push Japan’s tax free shopping sales growth up +2%, helped by a +31% increase in transactions. Average spend per transaction dropped to -22%. Japan saw a -25% decrease in tax free shopping sales for June compared with -16% in May, which Global Blue suggested was a sign that the stronger yen is “further affecting spending”. It said: “The country is seeing continued growth in transactions, up +20% in June versus +21% in May. This reflects the shift in the profile of tax free shoppers as the middle classes from tier two and tier three cities travel overseas for the first time.”
In South Korea, sales growth was +19% in the first half of the year, with transactions up +45%. However, average spend was down -18%. Global Blue commented: “South Korea’s tax free shopping sales performance of +133% for June is largely supported by the beginning of the anniversary of the MERS outbreak in the base for June (and July, which affected figures until September), which is also true of the spike in the number of transactions, up +200% for June. The -22% decline in average spend per transaction, meanwhile, follows the Asia-wide trend of increased arrivals driving more transactions, but on lower ticket items.”
Sales were down -3% in Singapore in the first half of 2016. In June the year-on-year decline was -4%. Global Blue attributed the performance to a shift in Singapore’s status from a luxury shopping hub to a short-haul cultural attraction. The number of transactions was up +5% but average spend fell -9% in June.
