CHINA. Duty free sales on Hainan island for Golden Week (1-7 October) rocketed by +142.7% year-on-year to RMB880 million (US$129.6 million). This equates to around RMB126 million (US$18.6 million) per day, or about +36% higher than average daily sales for the July-September quarter.
The figures, from CFA Analyst/Insight Provider Osbert Tang, who publishes on Smartkarma, underline the hugely beneficial impact of the enhanced offshore duty free shopping policy introduced on 1 July and the encouraging recovery of Chinese domestic travel.
Total sales for July-September – the first full quarter under the new policy – surged by +227.5% year-on-year to RMB8.61 billion (US$1.27 billion), driven by soaring purchases of top-selling category, cosmetics, which generated sales of around RMB4.2 billion (US$620.6 million).
According to the report, average daily duty free sales have increased by +53% year-on-year since July. Remarkably, duty free sales in Hainan through Q3 have now equalled total sales for the first half.
“In our view, this solid performance will reflect positively on [China Duty Free Group parent] China Tourism Group Duty Free Corp Ltd’s quarterly result to be announced in late October and will serve as a positive share price catalyst,” Smartkarma wrote.
The total numbers of items sold during Golden Week reached 848,000, a +94.3% rise year-on-year. Based on the data, Smartkarma said, average duty free spending per visitor during the first seven days of the Golden Week reached RMB7,040 (US$1,037), a +72% increase year-on-year.
“We believe this trend is positive to CTG Duty Free as this suggests a significant pick-up in the spending appetite of individual customers,” Tang said.
As reported, sales for July-September – the first full quarter under the new policy – surged by +227.5% year-on-year to RMB8.61 billion (US$1.27 billion), driven by soaring purchases of top-selling category, cosmetics, which generated sales of around RMB4.2 billion (US$620.6 million).
To put those numbers into context, in the whole of 2019 offshore duty free shops on the island generated total revenues of RMB13. 61 billion (US$1.98 billion).
Total customer numbers reached 1.29 million, up +146.9% year-on-year. The top three categories were cosmetics (49%), watches (12%) and jewellery (12%), accounting for an aggregate o73.2% of total sales.
Commenting on the announcement this week of a joint venture between Chinese digital Alibaba and long-time global number one travel retailer Dufry, Smartkarma noted that the announcement had raised concerns about the potential threat to CTG Duty Free (parent of China Duty Free Group). However, it commented: “While rising competition is a valid concern to CTG Duty Free, we believe any estimate of their impacts is overblown in the near term. It will take time before this potential new JV becomes a meaningful challenge to CTG Duty Free, in our view.
“The JV will need to secure a duty free licence before its entry to the market in China. Currently, all licences are in the hands of China’s major State-owned Enterprise (SOEs). CTG Duty Free’s parent – China Tourism Group – is one of the 97 centrally owned SOEs under the direct supervision of the State-owned Assets Supervision and Administration (SASAC). We believe this is a very important competitive advantage when compared with many new and potential entrants to the duty free space.”
Footnote: Both China Duty Free Group President Charles Chen and Dufry CEO Julián Díaz are addressing the Virtual Travel Retail Expo Knowledge Hub sessions on Monday, 12 October in interviews with The Moodie Davitt Report Chairman Martin Moodie. The sessions will be available both live and on demand. Click here for registration details.
