CHINA. GDFS, which describes itself as travel retail’s first membership-based global vertical e-commerce company, has outlined bold growth ambitions for the channel. It has also spoken out about the growing daigou market, much of which it says is based on fake products.

Senior executives from the Beijing- and Hong Kong-based company attended TFWA World Exhibition in Cannes where they spoke with prospective retailer and brand partners from around the globe.

In an interview with The Moodie Davitt Report, President and Vice President Barry Chen and Vice President Diana Xi said that GDFS is ideally placed to help international travel retailers increase sales to Chinese travellers.

Consumers pay an annual membership fee of US$118 to benefit from shopping opportunities through the GDFS website (www.gdfs.com) and the physical and online offers of its overseas partners. Already some 120,000 members have signed up.

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(Pictured above and below) GDFS’s new Global Service Centre in Seoul is the first of a planned network of support operations to assist Chinese shoppers around the world

The company plans to major on the legitimacy of its product offer and that of any overseas duty free partners. It wants to work with foreign travel retailers,whose offers it will promote to the GDFS membership base. Those retailers in turn will be asked to provide members with shopping privileges and discounts. GDFS offers free shipping back to Mainland China.

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Chinese consumers pay an annual membership fee of US$118 to benefit from shopping opportunities through the GDFS website

“We have a very strong supply chain company which has partners or representative offices in Hong Kong, Singapore, Japan, Korea, America, France, Germany, Italy and Spain,” said Xi.  “Our supply chain company is able to deliver personal products from these countries to the main cities globally.”

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The GDFS team in Cannes at The Moodie Davitt Report bureau. (Left to right) Nico Qi, Executive Assisant; Skylar Wang, Media and Public Relations Manager; Barry Chen, President; and Vice President Diana Xi

Reclaiming market share for bona fide duty free from the daigou sector

Assuring consumers of genuine product is key to GDFS’s approach. GDFS estimates the daigou market (goods purchased cheaply abroad and brought home by millions of Chinese travellers) to be worth some €10 billion annually. But up to 70% of the goods may be fake, it warns. “We’d like to get rid of this problem and of the daigou market,” said Chen.

GDFS says it will cooperate with bona fide duty free retailers and brands to reclaim market share from the shadowy daigou market. “We want to bring more customers to consume in the duty free shops and provide value-added services for them to improve both loyalty and purchasing power,” the company said.

img_6896The company is also targeting shopping malls and villages in Europe. “Because our target membership is Chinese travellers who buy abroad, we want to cooperate with duty free retailers and shopping malls around the world,” Chen explained. “We can help release the Chinese purchasing power for our partners. [These partnerships] will also add consumer confidence about our website – that they are buying the real thing. Fake goods are still a big problem in China.”

Explaining the benefits of working with GDFS, Chen said: “When Chinese people travel abroad they have a limited quota to be able to bring back [directly] into China. We would like to work with duty free operators and shopping malls to allow customers to purchase more goods overseas.

“Travellers do not need to worry about their luggage being overweight. We will ship back to China for them. In this way every passenger can purchase more.” Chinese travellers have a RM5,000 (US$745) duty free allowance for goods carried back to China but GDFS says it can ship additional goods direct back on an unlimited basis.

For its own e-commerce site, GDFS ships goods from its warehouse in Hong Kong direct to Mainland Chinese purchasers. “We have more than 80 brands and over 6,000 SKUs on our website,” Chen said. The company also has plans to open physical duty free stores abroad in due course, with joint ventures in South Korea and Japan as key targets.

Korean breakthrough as Global Service Centre opens

The company is already working with travel retailer SM Duty Free in South Korea and has just struck an agreement with Shinsegae Duty Free. Another Korean travel retailer, Doota Duty Free, is set to follow soon. GDFS members get a -20% discount when buying at SM Duty Free as well as other benefits such as free coffee and additional dining discounts.

GDFS has its own international supply chain and logistics operation and on 1 October opened a Global Service Centre in SM Duty Free’s downtown store in Seoul. “We’re now preparing to launch more Global Service Centres abroad, and are negotiating to do so in Germany and Paris,” Chen told The Moodie Davitt Report. “This will help release further purchasing power from our customers.”

“We offer to ship goods direct back to China from Korea. We can also ship them to Japan, Hong Kong and Singapore from Korea,” said Xi.

“We have two aims. We want every person to be able to purchase greater quantities. And we want more Chinese people to know about duty free. Many still do not go to the duty free shops when they travel abroad or they go there and don’t buy anything. We want to improve the potential purchasing power of Chinese customers by cooperating with, say, Dufry or Heinemann.

“The customers can pre-order through us or enjoy discounts and other services. They could, for example, purchase a €100 overseas duty free shopping card for €90. We will have a lot of services to attract them before they go abroad – not at the destination but before the destination. We will help market the duty free stores to let customers make their purchasing decisions and let them know about unique offers.”

“Our target is the Chinese middle class, which is booming,” said Media & Public Relations Manager Skylar Wang. “Because there’s a threshold to become a member, our customers are prepared to pay a higher price in order to find the genuine article. And the prices on our website are in line with the duty free stores.”

 

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