China News Service, Haikou, January 2nd, title: "Changes" in duty-free shopping on Hainan Islands: Moderate competition for e-commerce entry

　　China News Agency reporter Wang Ziqian

　　At the end of the year, Hainan’s outlying island duty-free market "changed": The four ministries and commissions in China jointly approved the new six outlying island duty-free shops in Hainan.

A number of new duty-free shops on outlying islands opened immediately to join the peak season market.

The market structure of "one with four stores" increased to "five with ten stores", and the development trend attracted attention.

The picture shows tourists queuing to pick up the goods at the Hainan outlying island duty-free pick-up point at the Haikou New Harbour Terminal.

Photo by Luo Yunfei

　　Look at the scale: the huge growth of market capacity continues unabated

　　Affected by the epidemic in 2020, domestic consumers' overseas consumption will shift to Hainan.

The new tax exemption policy for outlying islands implemented in July further met market demand.

From January 1 to December 28, 2020, Hainan’s outlying islands had tax-free sales of 27.21 billion yuan (RMB, the same below), a year-on-year increase of 102%; the number of shoppers was 5.222 million, a year-on-year increase of 30%.

　　The sales of duty-free shopping on Hainan Islands were 986 million yuan in 2011 and reached 13.49 billion yuan in 2019.

Zeng Guang, assistant to the director of the Economic Research Institute of Guosen Securities and leader of the large consumer group, stated in his article "China's Tax-Free Industry Towards a Stage of Moderate Competition" that the compound annual growth rate of Hainan's outlying island tax-free sales from 2012 to 2019 exceeded 30 %.

In the next few years, outlying island tax exemption should be the main battlefield for the return of the entire consumption power.

　　According to analysis by Zhao Zheng, an analyst in the social service industry of the Guotai Junan Securities Research Institute, the general trend of China's consumption return has long been revealed, and whether outbound tourism will resume its high tax-free boom.

With the increase in the number of shoppers and the increase in unit price per customer, Hainan’s outlying islands’ duty-free sales are expected to reach 153.9 billion yuan in 2025.

The picture shows customers choosing duty-free goods in the Sanya International Duty Free City, Hainan.

Photo by China News Agency reporter Wang Xiaobin

　　Look at the pattern: It’s hard to shake the position of “One Super” towards moderate competition

　　The liberalization of Hainan's outlying islands' duty-free licenses is the general trend, but the future development model should be "moderate competition."

　　Zhao Zheng pointed out that experience in overseas markets shows that the release of tax-exempt licenses will pose a greater challenge to operations.

The liberalization of South Korean licenses has led to vicious competition, small and medium-sized enterprises gradually withdraw from the market, and large enterprises have thin profits.

Hainan should learn from Hong Kong's experience and attach importance to property endowment and operational efficiency.

Zeng Guang believes that the intensity of competition in the duty-free market on Hainan’s outlying islands will be lower than that of Hong Kong. Therefore, the profit margins of duty-free shops on Hainan’s outlying islands may fluctuate in the future, but there will be no significant cliff-like decline.

　　During the interview, the relevant person in charge of CDF pointed out that changes in the industry may bring many new gameplays and new imaginations.

Li Xingcun, senior manager of China Service's duty-free marketing department, 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 offshore duty-free shops in Hainan were all wholly-owned or holding companies of CDFG.

Driven by tax-free sales, CDFG has exceeded 550 billion yuan in market value.

　　The reporter noted that the newly approved Sanya Sea Travel Duty Free City chose Lagardale and DFS as its channel suppliers, and Haikong Global Boutique (Haikou) Dufry City chose Dufry as its channel supplier.

Xie Zhiyong, chairman and general manager of Hainan Tourism Investment Duty Free Co., Ltd., said that the cooperation is to break through the bottleneck of the duty-free channel supply chain and accelerate the introduction of first-line international brands.

　　The industry generally stated that due to its obvious advantages in supply chain, marketing and operation, CDFG's “one super” position in the outlying island duty-free market will not change in the short term.

Tourists shop for duty-free goods at the duty-free shop of Riyue Square in Haikou.

Photo by China News Agency reporter Luo Yunfei

　　Look at the trend: e-commerce giants enter the game to optimize shopping experience

　　E-commerce giants appeared in newly approved duty-free shops: Sanya Hailv Duty Free City and JD International started 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 e-commerce operation experience and global consumer digital marketing provide customers with a new shopping experience on the Internet.

　　Due to the scarcity of tax-free licenses, it is obvious that e-commerce giants cooperate with tax-free companies to share the tax-free business on outlying islands.

Zeng Guang pointed out that taking into account both offline and online models 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 consumption environment and innovative business experience.

Problems such as crowded shopping and queuing to pay directly affect shopping pleasure.

　　Industry insiders pointed out that Hainan’s newly opened or planned duty-free shops are large in scale, which puts more demands on the business layout of operators.

As an important marker for the construction of an international tourism consumption center, tax-free consumption has grown from scratch, from less to more, thanks to policy support and encouragement; from having to excellent, "excellent" becomes the core competitiveness, which tests the strategic vision and Execution.

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