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China News Service, Haikou, January 2. Title: “Changes” in duty-free shopping in the Hainan Islands: moderate competition for e-commerce
Wang Ziqian, reporter for the China News Agency
At the end of the year, the Hainan Outer Islands duty-free market “changed”: China’s four ministries and commissions jointly approved the six new Hainan Outer Islands duty-free shops. Several new duty-free shops on the outlying islands immediately opened to join the peak season market. The market structure of “one store with four stores” increased to “five stores with ten stores”, and the development trend attracted attention.
Look at the scale: the huge market capacity keeps growing
Affected by the epidemic in 2020, foreign consumption of domestic consumers will move to Hainan. The new tax exemption policy for the outer islands implemented in July further satisfied market demand. From January 1 to December 28, 2020, Hainan’s outer islands duty-free sales were 27.21 billion yuan (RMB, same below), a year-on-year increase of 102%; the number of buyers was 5.222 million, a year-on-year increase of 30%.
Tax-free shopping sales in the Hainan Islands were 986 million yuan in 2011 and reached 13.49 billion yuan in 2019. Zeng Guang, Assistant to the Director of the Guosen Securities Economic Research Institute and leader of the large group of Consumers stated in its article “China’s Duty-Free Industry Towards a Moderately Competitive Stage” that the compound annual growth rate of Hainan outlying islands duty-free sales from 2012 to 2019 exceeded 30%. In the coming years, the outlying islands tax exemption should be the main battlefield for the return of all consumption power.
According to the analysis of Zhao Zheng, social services industry analyst at Guotai Junan Securities Research Institute, the overall trend of China’s consumption return has long been revealed, whether outbound tourism will return to the exemption boom of taxes. With the increase in the number of buyers and the increase in the unit price per customer, it is estimated that in 2025, the duty-free sales of the outer islands of Hainan will reach 153.9 billion yuan.
Notice the pattern: Difficult to shift from “One Super” to moderate competition
The liberalization of duty-free licenses in the outer Hainan islands is the general trend, but the future development model should be “moderate competition”.
Zhao Zheng noted that experience in foreign markets shows that the release of tax-exempt licenses will pose a greater challenge for operations. The liberalization of South Korean licenses has led to fierce competition, small and medium-sized companies are gradually withdrawing from the market and large companies are making little profit. Hainan should learn from the Hong Kong experience and place importance on property endowment and operational efficiency. Zeng Guang believes that the intensity of competition in the duty-free market in the outer islands of Hainan will be less than that of Hong Kong. Therefore, the profit margins of the duty-free shops in the outer islands of Hainan may fluctuate in the future, but there will be no significant decline in the form of a cliff.
During the interview, the relevant person in charge of CDF pointed out that changes in the industry can bring many new games and new imaginations. Li Xingcun, senior manager of the duty-free marketing department of China Service, told reporters that the number of duty-free shops has increased at the same time as the market capacity has grown rapidly.
Before the entry of the new competitors, the four overseas duty-free stores in Hainan were all wholly owned or holding companies of CDFG. Driven by the performance of tax-free sales, the market value of CDFG has exceeded 550 billion yuan.
The reporter noted that the recently approved Sanya Sea Travel Duty Free City chose Lagardale and DFS as its channel providers, and Haikong Global Boutique (Haikou) Dufry City chose Dufry as its channel provider. Xie Zhiyong, Chairman and CEO of Hainan Tourism Investment Duty Free Co., Ltd., said that the cooperation aims to break the bottleneck of the duty-free channel supply chain and accelerate the introduction of top international brands. line.
The industry generally stated that due to its obvious advantages in supply chain, marketing and operation, CDFG’s “first super” status in the outlying islands duty free market will not change anytime soon.
Watch the trend: e-commerce giants enter the game to optimize the shopping experience
E-commerce giants appeared in recently approved duty-free shops: Sanya Hailv Duty Free City and JD International launched a supply chain cooperation to open physical stores, which will further promote online and offline integration in the future; Haikong Global Boutique (Haikou) Duty Free City uses Alibaba to enrich The advantages of experience in e-commerce operations and digital marketing for global consumers provide customers with a new Internet shopping experience.
Due to the shortage of duty-free licenses, it is obvious that e-commerce giants cooperate with duty-free companies to share the duty-free business in the outer islands. Zeng Guang pointed out that taking into account the online and offline modes will greatly increase the penetration rate of the entire Chinese duty-free market.
With the increase in the number of duty-free shops, customers pay attention to the consumer environment and innovative business experience. Issues such as crowded purchases and queues to pay directly affect the pleasure of shopping.
Industry insiders noted that Hainan’s newly opened or planned duty-free shops are large-scale, placing more demands on operators’ commercial distribution. As an important marker for the construction of an international tourism consumption center, duty-free consumption has grown from zero, from less to more, thanks to the support and impulse of policies; From having to excellent, “excellent” becomes the core of competitiveness, which tests strategic vision and Execution.
