CHINA. Offshore duty free sales in Hainan province soared to RMB46.8 billion (US$7.24 billion) in the full year following the introduction of enhanced shopping allowances on 1 July 2020, a +226% increase year-on-year, Hainan Customs reported yesterday.
Key changes to the offshore duty free shopping policy last year included:
- The offshore shopping quota being increased from RMB30,000 to RMB100,000 (US$15,500).
- The number of categories was raised from 38 to 45 (including wines & spirits).
- The limit of RMB8,000 (US$1,250) for a single purchase was removed.
- The number of cosmetics skus that could be bought was raised to 30 from 12
Hainan’s offshore duty free sector, boosted also by a proliferation of retailers since late 2020, is well on course to smash all previous records in calendar year 2020.
Last year, revenues (including duty paid sales) rose by +127% to around RMB32.74 billion (US$5.05 billion). Duty free sales alone reached RMB27,476 billion (US$4.25 billion).
Local authorities had projected that combined sales would pass US$9 billion this year, rising to at least US$15.5 billion by 2022 and US$46.5 billion by the end of 2025 in line with Hainan Province’s 14th Five-Year Plan.
Based on Customs figures to date and its own June projection of RMB4.2 billion (US$650 million) for duty free/duty paid sales, Goldman Sachs estimates H1 2021 duty free revenue alone at RMB27,383 million (around US$4.24 billion) – an increase of more than +265% year-on-year – with duty free and duty paid revenues combined reaching RMB29,985 million (US$4.64 billion).
“Based on the current run rate (i.e. RMB30 billion in 1H21), we believe Hainan government’s target to reach RMB60 billion (US$9.3 billion) this year would still be achievable,” said Goldman Sachs in a note.
Shopper conversion rate (excluding Hainan residents) reached a healthy 57% in May, the company said. Average spend per shopper was RMB5,078 (US$785) in May, easing to RMB4,385 (US$678) in June.
Note: Every fortnight The Moodie Davitt Report publishes Hainan Curated, in association with Foreo, a selection of all recent stories from the offshore duty free sector in Hainan province.
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