CHINA. Three new duty free stores will be opened in Sanya, Hainan this year, in line with the enhanced offshore duty free shopping policy introduced on 1 July, following the issuing of two new trading licences.

Speaking at a press conference today, Hainan Provincial Department of Commerce Director Chen Xi said that after comprehensive consideration, the Hainan Provincial People’s Government has officially approved two Hainan enterprises to enjoy full duty free business qualifications on the island.

They are Hainan Tourism Investment Duty Free Co Ltd (a wholly-owned subsidiary of Hainan Tourism Investment Development Co Ltd) and Hainan Development and Trade Co Ltd (a wholly-owned subsidiary of Hainan Development Holding Co Ltd)

Xi also reported that Hainan’s duty free sales from the four offshore stores had reached an extraordinary RMB5 billion (US$723.8 million) in the period 1 July to 18 August, an increase of around 2.5 times year-on-year (see full details below).

The information, courtesy of the Hainan Provincial Bureau of International Economic Development* (Hainan IEDB) working closely in association with The Moodie Davitt Report, is further evidence of the near unstoppable momentum of the island’s offshore duty free shopping sector.

CDF Mall in Haitang Bay is posting extraordinary sales following the introduction of the new offshore duty free shopping policy on 1 July. While China Duty Free Group will face increased competition in the future, it is expected to maintain its dominant position on the island.

Today’s press conference was convened to discuss the effectiveness of the implementation of the improved offshore shopping policy and the progress of related work in Haikou.

Xi said that the new licences will help Hainan establish a strong line-up of diversified retail entities and operations. In the next step, Hainan will also welcome duty free companies from outside the province to compete and participate in Hainan’s booming offshore retail activity to better meet consumer demand, he added.

(Above and below) The shape of things to come: The renderings of Haikou International Duty Free Mall above and below underline the extraordinary scale, grandeur and beauty of the China Duty Free Group project set to open in 2022

Two downtown stores will open together with an enhanced store at Sanya Phoenix International Airport, Xi said. He noted that in accordance with the requirements of the national ministries and commissions, moderate competition within the duty free industry is encouraged on the resort island.

This well help to ensure that visitor numbers are boosted and that their expectations are met, Xi said. Improved shopping facilities will also aid consumption and improve transport and commercial infrastructure.

The specific location – and any specialist partners – of the downtown stores are yet to be determined. All operators must meet certain requirements in terms of investment, sales, floor space, and design and merchandising standards. They must be able to ensure store opening by year-end.

Hainan duty free sales boom

Xi also reported that Hainan’s duty free sales from the four offshore stores had reached an extraordinary RMB5 billion (US$723.8 million) in the period 1 July to 18 August, an increase of around 2.5 times year-on-year. To put those numbers into further context, in the whole of 2019 offshore duty free shops on the island generated revenues of RMB13. 61 billion (US$1.98 billion).

Strong Chinese presence at Moodie Davitt Virtual Travel Retail Expo

The pioneering Moodie Davitt Virtual Travel Retail Expo in October is being held just after the Chinese holidays to maximise retailer presence.

China Duty Free Group is a Diamond Partner at the event and Hainan IEDB a Platinum Partner. China Duty Free Group President Charles Chen will deliver a keynote presentation and Q&A with The Moodie Davitt Report Chairman Martin Moodie.

Exhibitors will be able to meet the whole CDFG and CDF-Sunrise teams, and representatives from Hainan IEDB. Other leading Chinese (or China-based/operating) retailers attending include the powerful CNSC, newcomer Wangfujing; Shenzhen Duty Free; Zhuhai Duty Free; King Power Group HK; Dufry; Sky Connection; The Shilla Duty Free (Macau); DFS Group.

There will also be an extensive Chinese media presence including Globuy, TripurX, Global Travel Retail Observer, Jessica’s Secret, Jing Daily and Jing Travel. For more information click here.

Average daily sales exceeded RMB100 million (US$14.5 million); while the number of shoppers reached 740,000, a year-on-year increase of +70%. The number of purchases reached 4.58 million, a year-on-year increase of 1.5 times.

Those statistics clearly point to a huge rise in spend per customer, driven by the expanded product category range (see table below), removal of the previous RMB8,000 (US$1,158) limit on individual items and the more than tripling of the annual duty free allowance from RMB30,000 (US$4,215) to RMB100,000 (US$14,050)

The Hainan Provincial Bureau of International Economic Development reported that newly added categories, such as portable electronic items, tablets and laptops, mobile phones and spirits and wine were proving highly popular, accounting for 95% of sales among the new categories.

Consumption of items in excess of the former RMB8,000 limit has increased significantly. Sales of such items amounted to nearly RMB1.2 billion (US$173.7 million) an increase of 4.2 times year-on-year. The share of such items rocketed seven percentage points to 24%.

Cosmetics is king

The increase in the number of cosmetics skus able to be purchased (now 30, up from 12) has had a predictably dramatic impact on sales. The number of cosmetics purchases increased by 1.8 times year-on-year, making the sales of this category a year-on-year increase. Jewellery purchases also soared, increasing by 1.5 times over the same period in 2019.

Penetration rises

Both visitor numbers to Hainan and retail penetration also showed very strong growth. In July, the number of visitors to Hainan was about 1.6 million, Xi said. Among them, 467,000 people purchased offshore duty free, representing 29% of visitors, an increase from 12% in the same period last year.

The new categories and allowances, introduced on 1 July, have been a game changer for duty free on Hainan island

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The Hainan Provincial Bureau of International Economic Development (Hainan IEDB) is a government agency established by the Hainan government on 11 April 2019. It aims to build Hainan as a Free Trade Port in all respects with distinctive Chinese features.

The Moodie Davitt Report is working closely with Hainan IEDB, which is a Platinum Partner at the Moodie Davitt Virtual Travel Retail Expo in October.

As reported, Hainan IEDB has just launched a new website to encourage global investment in the ambitious Hainan Free Trade Port development.