INTERNATIONAL. January results from tax free shopping specialist Global Blue point to a strong month for Japan, the UK and Spain but a troubled period for South Korean retailers amid mounting political controversy with China.
The Asian tax free sales (TFS) market grew for a second consecutive month in January, posting a +8% year-on-year sales in-store increase. This growth was driven by an increase in transactions, up +8% month-to-date, while average spend also increased for the first time since early 2016, up +1%.
Asia’s upturn in performance can be attributed wholly to a very strong month for Japanese TFS, which saw large numbers of Chinese shoppers travel to the country and create positive momentum, Global Blue noted [results which gel with the findings of the Japan Department Stores Association, which this week reported a +24.8% in duty and tax-free sales to ¥21.7 billion/US$240.6 million in January, a record monthly figure -Ed].
During January, TFS sales in Japan increased by +28% month-to-date, driven by a +35% rise in transaction volume as Chinese shoppers visited Japan in large numbers.
This high volume of trips was driven by the increased spending power enjoyed by Chinese shoppers, as the Japanese Yen continued to soften against the Yuan during January. Last month’s growth was also boosted by an earlier than usual Chinese New Year, which saw more Chinese shoppers travelling than the January average.
During January, Japan saw positive transaction growth across all spend brackets – a positive sign for the longer-term health of the Japanese TFS market, Global Blue said. Lower value transactions (below ¥50,000/US$444) increased by +50%, while high-value luxury purchases (above ¥600,000/US$5,320) increased by +16%, showing desire to spend from all economic groups.
However, the situation was less buoyant in nearby South Korea. The Korean TFS industry has experienced challenging conditions over the last few months and during January the negative performance continued to inhibit growth across Asia.
During January, Korean sales declined by -19%, driven fully by a drop in the number of transactions (-18% month-to-date) as political instability [the country’s Presidential crisis and the THAAD dispute with China] and security concerns deterred Chinese consumers, who account for the majority of Korean TFS spend.
Most key “globe shopper” nationalities, as Global Blue dubs travelling shoppers, posted sales in-store growth in Asia during January, largely due to the softening of currency in Japan. Chinese sales grew by +15% in January across the region, driven by a +11% increase in transactions. Korean sales grew by +14%, posting an impressive +37% increase in transactions last month.
Japanese globe shoppers also delivered a stellar month in terms of TFS, with sales up +28% year-on-year and transactions up by +21%. Global Blue’s European Tax Free Shopping (TFS) sales performance continued to improve in January, thanks to an increase of visitors to the region and positive macro-economic conditions driving up spend with key nationalities.
Soaring UK, Spain sales spur strong start for Europe
European TFS experienced a strong start to 2017, with month-to-date sales growth of +21% in January. This second consecutive month of growth followed a +3% increase during December – the first time European TFS had grown since the same month in 2015.
Global Blue attributed January’s strong performance to several factors, including a healthy rise in average spend (+8%); a significant increase in transactions across all markets (+12%); and a favourable comparison to January 2016, when the slowdown of the TFS market began to take hold.
Transaction growth could be seen across all European markets as increased numbers of consumers visited the region in January. This rise can be explained in part by favourable currency trends from key markets, including USA and Russia, but also by Chinese New Year falling earlier than usual, delivering a surge of Chinese visitors to the region in late January, the company said.
Transaction growth across all European markets
France continued its return to growth with sales in-store up by +20% month-to-date (following a +21% increase in December).
French performance was driven entirely by increased transactions (+20%) as visitors to the country spiked in January, while average spend remained flat at +0% month-to-date.
Italy and Germany both returned to growth for the first time in over 12 months, with sales in store up +11% and +5% respectively during January. Much like France, this growth can be attributed to increased visitors rather than a raise in average spend, Global View said, with Italian transactions up +10% and German transactions up +3%. This rise in performance is a welcome boost to two of Europe’s largest TFS markets, the company said.
Soft British Pound drives spending in the UK
While other key markets returned to growth, the continued softening of the British Pound Sterling helped cement the UK as Europe’s most affordable luxury shopping destination. During January, month-to-date sales rose by an impressive +45% as large numbers of shoppers visited the UK to benefit from the weak currency.
Unlike other key European markets, where performance was driven solely by an increase in transactions, the UK also saw a sharp rise in average spend during January. The UK’s average spend increase of +15% was a key driver of the healthy growth in European TFS last month.
Key nations perform strongly
The majority of key globe shopper nationalities posted sales in-store growth in January. Again, the month saw particularly strong growth for Chinese globe shoppers thanks to the timing of Chinese New Year. This surge of inbound travellers towards the end of January saw Chinese sales in-store return to growth at +35% month to date, driven by a +23% rise in transactions.
American and Russian globe shoppers also performed strongly in January, showing significant sales in-store increases of +39% and +32% respectively. This performance can be explained by a large uplift in transactions (USA +24% and Russia +37%) as domestic confidence in both countries continued to strengthen the US Dollar and Ruble against the Euro and British Pound.
Growth across all spend brackets
Analysis of spend behaviour also paints a positive picture for the European TFS market in January, Global Blue said.
Across the region’s top four TFS markets, positive transaction growth was seen across all spend brackets, from high street to luxury purchases. The volume of sales under €750 (US$794) grew by +10% month-to-date, while luxury sales of over €5,000 (US$5,295) increased by +11%, indicating a healthy stabilisation of the TFS market across all traveller income groups.
