CHINA. Offshore duty free sales (and related tax paid sales) in Hainan province are set to reach around CNY32 billion (US$4.89 billion) by year-end, according to local authorities. That would amount to a startling +135.3% increase in Chinese Yuan terms over 2019 (CNY13.61 billion), a remarkable result given the drastic impact of the COVID-19 pandemic on Hainan tourism in early 2020.
For the year to date, some 3.4 million customers have purchased around 19.06 million items, a rise of +130% compared with the same period last year.
Sales for the year to 24 December, including tax paid purchases, were CNY31.58 billion (around US$4.82 billion). Of that total, duty free sales represented CNY26.59 billion (US$4.1 billion), an increase of +102% year-on-year.
Those statistics represent a triumph for the enhanced offshore duty free policy introduced on 1 July, which raised the annual offshore shopping allowance from CNY30,000 (US$4,215) to CNY100,000 (US$14,050).
The policy also increased the categories able to be sold duty free from 38 to 45, including spirits & wine; while, critically, the number of cosmetics skus able to be purchased was raised to 30 from the previous 12. The limit of CNY8,000 (US$1,129) for a single purchase was removed, helping to drive up average spend.
Quoting official figures, Nanhai Net Hainan News reported that since the introduction of the new policy, average daily duty free sales have exceeded CNY120 million (US$18.4 million).
Revenues from the four existing stores for the key period from 1 to 24 December hit CNY3.71 billion (US$567.1 million), Hainan Provincial Department of Commerce said, representing around 11.6% of year to date sales.
Hainan province currently boasts four offshore duty free stores – two in Haikou; one in Haitang Bay, Sanya (home to the dominant business, CDF Mall run by China Duty Free Group); and one in Bo’ao.
As reported, in coming days, three more stores are to open soon in Sanya – operated respectively by China Duty Free Group (Sanya Phoenix International Airport); CNSC (CNSC International Duty Free Plaza); and Hailvtou Sanya Downtown. The last named is controlled by Hainan Tourism Investment Duty Free Co Ltd (a wholly-owned subsidiary of Hainan Tourism Investment Development Co Ltd) with support from Lagardère Travel Retail.
Additionally, two major duty free developments in Haikou, both set to open in early 2021, will be unveiled soon. Shenzhen Duty Free Group, supported by DFS, will open an initial 1,000sq m duty free store at the spectacular Mission Hills Resort Haikou on Hainan island early next year with an ambitious expansion to follow. More details on this and the other Haikou development to follow in the new year.
State internet media China.org quoting Liu Xiaodong, General Manager of China Duty Free Group’s business in Hainan, saying that offshore duty free had boosted local tourism, creating over 1,800 jobs and generating some RMB2.09 billion (US$32 million) in government taxes.
Exciting deveopments ahead as Hainan IEDB drives investor and Expo interest
The future for the island province’s tourism-driven retail sector looks rosy. Hainan Provincial Bureau of International Economic Development (Hainan IEDB) plans a flurry of activity before 2025 (when the whole island becomes tax free), including the construction of a number of pedestrian streets, commercial complexes, and business districts.
The Bureau will encourage several international retail giants to settle in Hainan, and attract an array of high-end brands to set up exclusive flagship and experience stores on the island. It will also host new product launches and debut events in order to enhance Hainan’s influence and voice in the global consumer sector.
On May 7-10, 2021, Hainan IEDB will host the China International Consumer Products Expo, which has attracted strong support from many of the world’s leading brands (details to follow in a separate report).
TFWA also plans to hold the ‘Hainan Special Edition’, a fused physical and virtual event, on the island from 10 to 13 May.
In the next phase of development, Hainan Province will focus on a series of key tasks to stimulate tourist-driven shopping and to drive the local economy. As noted, these include the introduction of new offshore duty free retailers across the island to encourage “orderly and moderate” competition.
Further measures will see the Hainan Provincial Department of Commerce launch a special duty free employment fair with the Hainan Provincial Department of Education. The Department of Human Resources and Social Security will reward the ‘most beautiful tax free shopping guide’; help travel retailers to improve their services; and jointly build an integrated service brand for Hainan’s offshore duty free shopping sector.
Hainan Island: Travel retail’s global hotspot The Moodie Davitt Report will publish a Hainan Island Special Report with the China edition of The Magazine in February 2021. Written by Martin Moodie and Dermot Davitt, it will explore how the offshore duty free business in China has become critical to the world’s leading brands across many categories.
The report will feature:
Contact Irene@MoodieDavittReport.com to partner with The Moodie Davitt Report for this special edition. |
