CHINA. In a major boost to the offshore business, China Duty Free Group (CDFG) has just introduced a new scheme allowing Mainland visitors to Hainan to spend any of their unspent RMB30,000 (US$4,240) annual allowance online for up to 180 days once they arrive back – and have the goods couriered to their home.
A CDFG spokesperson told The Moodie Davitt Report: “Travellers could not go shopping in CDFG stores [on Hainan Island] in the middle of the COVID-19 outbreak. After getting the government’s approvement as well as support of suppliers, CDFG has launched the Hainan offshore replenishment online service, which aims to serve 16-years old-plus Chinese citizens who leave the island within 180 days. The replenishment online service uses the offshore duty free personal yearly quota.”
The announcement confirms the pledge of CDFG and China International Travel Services (CITS) President Charles Chen in an interview with The Moodie Davitt Report last month, when he said that a key opportunity lay with unspent duty free allowances.
“The Hainan market is extremely big and each year there are so many visitors. We have a quota of RMB30,000 (US$4,230) per person per year but so far the average transaction is around RMB5,000 (US$705). So I said to the brands, we have RMB25,000 (US$3,520) to play with that is travel retail business.”
Now CITS and CDFG, in cooperation with the Hainan and central governments, have found a way to unlock that spend.
Right from the start of the COVID-19 crisis, CDFG has invested heavily in boosting its online activities.
According to state Chinese language media reports seen by The Moodie Davitt Report, CDFG’s online duty free sales are understood to have grown by +200% in Q1, generating a third of total revenues. Offline sales are also picking up fast, already back to 80% of last year’s record levels and expected to climb further in coming days as the crucial May holiday begins.
As we have reported regularly, Hainan seems certain to benefit from many Chinese travellers’ unwillingness (or inability due to travel restrictions) to venture overseas this summer. For the Chinese to travel abroad (and shop) in any significant numbers, China must first be considered ‘safe’ by any host destination, as must in turn any destination favoured by Chinese consumers.
That is what makes Hainan so attractive. The island province has recorded just 168 COVID-19 cases, with 162 of the patients having recovered, and only six deaths. On 24 March, several Chinese state media declared the island clear of COVID-19.
On 22 March, Hainan’s provincial government announced a CNY150 million (US$21.2 million) rejuvenation plan for the island’s beleaguered tourism industry with duty free shopping at the heart of its plans.
According to a statement on 7 April by Haikou Customs, sales have picked up encouragingly in the period from 19 February to 30 March.
“With sales of 1.857 million pieces, CNY1.283 billion (US$182 million), and 183,500 shoppers – the main business indicators have returned to about 80% of the same period last year,” the regulatory body said of sales in that timeframe.
In another boost for the island’s tourism sector, China unveiled plans on 15 April to permit visa-free travel to Hainan from May. The policy will allow travellers from 59 countries to visit Hainan for 30 days visa free, Qu Yunhai, Deputy Director of the State Immigration Administration told a press conference in Beijing.
The new rule will mean less stringent visa requirements than elsewhere in China, where travellers have to apply for visas through Chinese consulates abroad.