by Duty free retailing refers to the retail outlets located in airports or seaports where travelers can purchase goods such as alcohol, tobacco, perfumes, fashion accessories and others without paying any import duties. These shops provide a wide range of luxury and premium brands at discounted prices. Growing international tourism has significantly boosted the demand for duty free products over the years. According to the United Nations World Tourism Organization, international tourist arrivals grew from 1.4 billion in 2019 to over 1.5 billion in 2021, indicating a strong recovery in the tourism industry post pandemic. The global duty free retailing Market is estimated to be valued at US$ 38.95 Bn in 2023 and is expected to exhibit a CAGR of 8.6% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Dynamics:
Growing tourism is the key driver propelling the duty free retailing market forward. As mentioned earlier, increasing international tourist arrivals have augmented sales of duty free products. Additionally, growing disposable income and spending power of international travelers have encouraged them to spend more at airport duty free outlets. For instance, according to the World Travel & Tourism Council, the global travel and tourism market has contributed US$ 8.9 trillion to the global GDP in 2019 and is expected to increase to US$ 11 trillion by 2029. This rising spending on travel and tourism will continue driving duty free sales upwards over the coming years. Furthermore, rapid urbanization and growing middle class population in emerging economies such as China, India and Southeast Asia have further expanded the potential customer base for duty free retailers. Ongoing expansion of international airports and enhancement of airport infrastructure in developing countries also provide lucrative opportunities for duty free shops to widen their reach.
Segment Analysis
The duty free retailing market is dominated by airport duty free stores which accounts for over 70% share of the global market. Airports being the main transit points for international travelers helps drive higher sales volume at these stores. Airports allow travelers to purchase items without paying certain taxes and duties, hence offers attractive savings. Within airport duty free stores, beauty and cosmetics segment holds the major share owing to high demand for premium brands from flyers. Rising international travels is a key driver for this dominant segment.
PEST Analysis
- Political: Liberalization of trade policies by governments globally has promoted duty free shopping. Strong international relations and open-border policies aid cross-border travels and duty free purchases.
- Economic: Rise in disposable incomes and spending power coupled with economic growth in emerging nations is driving international travels and consequently duty-free shopping. Depreciating local currencies also make overseas shopping attractive.
- Social: Changes in lifestyle and consumption patterns have increased the preference for premium and luxury brands particularly among young travelers. Social media influence has made certain items aspirational purchases while traveling.
- Technological: Digitalization and online channels allow pre-booking of duty free products giving travelers convenience. Technologies like virtual reality provide immersive product discovery at stores helping boost sales. Customer data analytics helps target personalized offerings.
Key Takeaways
The global duty free retailing market is expected to witness high growth over the forecast period supported by recovery in international travels post pandemic. Air travel is anticipated to bounce back close to pre-pandemic levels by 2024 aiding sales recovery at airport stores.
Regional analysis: Asia Pacific accounts for the largest share currently in the duty free retailing market led by strong travel demand from China, Thailand, Malaysia and other Southeast Asian countries. However, European region is projected to emerge as the fastest growing market led by countries like U.K., Germany, France owing to widespread duty-free shopping networks and growing fashion and premium brands culture.
Key players operating in the duty free retailing market are Dufry AG, LOTTE Duty Free Company, DFS Group Limited, Gebr. Heinemann SE & Co. KG, The Shilla Duty Free, The King Power International Group, James Richardson Corporation Pty Ltd., Duty Free Americas, Inc., Flemingo International Ltd., Dubai Duty Free, and China Duty Free Group Co., Ltd. Dufry AG has leading presence globally while LOTTE Duty Free dominates the Asian markets. The industry is characterized by mergers and acquisitions with key players pursuing geographic and product portfolio expansions.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
