CHINA. China Duty Free Group (CDFG) President Charles Chen called for “openness, communication, cooperation and innovation” between all travel retail stakeholders in exploiting the potential of the Chinese travel retail market, in a compelling opening session of the Knowledge Hub at the Virtual Travel Retail Expo today.
In delivering a fascinating keynote presentation titled New Impetus, New Format and New Trend – Exploration and Prospects of China’s Travel Retail Market, Chen outlined the vast scale of opportunities in the Chinese market. He also covered the advance of omnichannel engagement to reach shoppers and shared his thoughts on the big issues facing the travel retail industry as it begins to build back from tough COVID-19 challenges.
And in a fitting conclusion to a memorable session, CDFG was recognised with an Outstanding Achievement Award from The Moodie Davitt Report for its services to the industry, notably over the past 18 difficult months (see below).
“Let’s work together to explore China’s travel retail market and create new patterns in the global travel retail industry, with openness, communication, cooperation and innovation” – CDFG President Charles Chen
Addressing the travel retail industry in his presentation (full video below), Chen said: “The Chinese border will open one day, and Chinese consumers will still be travelling and shopping around the world and visiting duty free shops. So we need to seize this special time, research the characteristics of the Chinese consumers and constantly adapt strategies.
“Therefore, we should have firm confidence in our future development. In view of the long-term existence of the pandemic and the profound advancements in communication modes between brands and consumers, we suggest that brands closely track the needs of consumers, especially high-end members, and strengthen innovative services.”
Chen called on brands to provide greater diversity in their duty free product offer, including more goods exclusively created for the travel retail market. “Exploring ways to provide more commodity choices for travel retail consumers will be the direction of our joint efforts in the future,” he said.
He observed that in some regions travel retailers pay more attention to daigou individuals and businesses, rather than ordinary consumers. “CDFG strongly disagrees with this behaviour and we also hope that brands will take this issue very seriously,” Chen said. “This behaviour has greatly affected the development of the global travel retail industry, including China, and is not conducive to brands cultivating truly loyal consumers.”
He also suggested that brands should not agree to set different prices for different duty free retailers in the Hainan market, to “jointly maintain the smooth and sustainable development of the market”.
Sharing his thoughts on airport retail, he tackled the issue of commercial contracts, suggesting they need to change in light of what has happened with the pandemic. Chen said: “Airport passengers have greatly reduced, having a huge impact on the normal operation of the duty free business in the airport.
“We have been actively communicating and negotiating with airports, hoping to adjust the MAG [Minimum Annual Guarantee] models according to the international passenger flow of the terminals and sales fluctuations, provide more preferential rental levels, commercial terms and better duty free operating environments.
“We believe such measures are more reasonable and can promote the sustainable development of the travel retail industry, especially the development of the airport duty free industry.”
On the burgeoning offshore duty free channel in Hainan, where CDFG is dominant market leader, Chen said: “As an important pillar in the construction of the Hainan Free Trade Port, the offshore duty free policy will not only become an important means to attract the return of overseas high-end consumption, but will also drive the rapid development of Hainan’s travel industry.
“We propose continuing to maintain a sound development environment, learning from the experiences and lessons of the duty free industry in certain countries, and looking forward to stable and far-reaching implementation licenses in the future, so as to create an appropriate and controllable competition pattern.”
In a Q&A session, Chen was asked by The Moodie Davitt Report Founder and Chairman Martin Moodie if the eventual return of international air travel out of China could stunt Hainan Island’s rapid growth as a duty free haven. He replied that this was not a concern and he had full confidence in the continued growth of the island a key holiday destination for both the Chinese and overseas visitors, and that the duty free business would grow with it.
Chen went on to outline CDFG’s CSR achievements and its commitment to environmental protection. He said he wanted CDFG to promote the transformation towards “beautiful consumption” and “protect the future of the beautiful planet”. Addressing the industry he said: “I also call on the global travel retail industry to make joint efforts to protect our common home, the earth, and achieve sustainable and healthy development.”
Earlier in his presentation, Chen had explored the potential for growth in the Chinese consumer market, and shared an eye-opening forecast from a recent McKinsey research report. According to its findings, in the next ten years, the number of middle and high-income families in China is expected to increase by about +70% to 400 million, taking it close to the total of such families in Europe and the US.
“Behind this figure is a consumption growth opportunity worth about US$5 trillion. The potential of China’s consumer market cannot be underestimated,” he said.
He said that digitalisation will play a key role in unlocking that potential growth, not least to enable targeting the spending power of Gen Z consumers. He also said that CDFG will use digitalisation to target the growing Chinese traveller base before, during and after travel.
Chen explained: “We are focused on building the digital CDFG online system, constantly optimising functions of the major member platform, and strengthening the pre-travel penetration in the dimensions of browsing, search, comparison and pre-purchase.
“During travel, we continue to upgrade the stores, constantly enrich consumers’ interactive experience and promote transformation.
“After travel, we continue to guide and encourage consumers to share their experiences on social platforms, strengthen word-of-mouth reputation and enhance consumer loyalty.”
Issuing a closing industry rallying call, Chen concluded: “Let’s work together to explore China’s travel retail market and create new patterns in the global travel retail industry, with openness, communication, cooperation and innovation.”
A special moment came at the end of the Charles Chen session, when Martin Moodie presented China Duty Free Group with an award for its outstanding contribution to the travel retail industry (see certificate above).
Outlining the reasons for this recognition, Moodie said: “On only a very few occasions down the years has The Moodie Davitt Report believed that an organisation or individual’s achievements have been so remarkable that we have singled them out for special recognition.
“And few would argue that the performance of China Duty Free Group over recent years, in rising from number 19 in The Moodie Davitt Report’s top travel retailers ranking to number one in just ten years, is deserving of special recognition.
“What a performance it has been and what encouragement and hope CDFG has given all of us through the darkest days of this crisis with its spectacular success in Haitang Bay; its wave upon wave of great collaborations with the world’s leading brands; in the way it has helped brands amplify their messages to vast audiences across the mainland via the power and reach of social media; and in the leadership it – and its President, have demonstrated.
“So it is with very great pleasure that I present this Outstanding Contribution to the Travel Retail Industry Award – a special award recognising China Duty Free Group’s stellar achievement in becoming the world’s number one travel retail by sales in 2020, a position it has enhanced through 2021. Congratulations.”
