by Duty-free retailing refers to the sale of goods, like alcohol, tobacco, perfumes, and other luxury items to international travelers without charging customs or import taxes. These retail shops are located within secure areas of international airports, seaports, train stations, and land border checkpoints. They provide travelers the opportunity to purchase tax and duty-free goods before passing through customs into another country. The global duty-free retailing market offers various products including fragrances and cosmetics, wine and spirits, tobacco goods, fashion accessories and apparels, confectionery and fine foods, and others. The market has witnessed significant growth due to robust growth in international tourism. According to UNWTO, international tourist arrivals reached 1.5 billion in 2022 and are projected to increase further due to pent-up demand from the COVID-19 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
International tourism is expected to continue driving the growth of the duty-free retailing market over the forecast period. According to UNWTO, tourism contributes over 10% to the global GDP and one in every ten jobs globally. Rapid globalization and increasing urbanization have led to a substantial rise in international travel. Additionally, improved connectivity through air travel and increasing wealth and disposable income in emerging economies are fueling the number of international leisure trips and business travel. According to the Airports Council International, air passenger traffic increased by 134% between 2000 and 2017. This rise in international travel is expected to significantly drive the demand for duty-free goods at airports. Furthermore, growth in e-commerce and online duty-free and travel retail is expected to offer new opportunities for duty-free retailers, reaching new customers and boosting overall market growth over the forecast period from 2023 to 2030.
Segment Analysis
The duty free retailing market can be segmented into airport duty free, cruise line duty free, rail station duty free, and border, downtown and hotel duty free. The airport duty free segment dominates the overall market with around 63% share in 2021 owing to high footfall and purchasing power at airports. With increasing air traffic and rise of low cost carriers, the airport duty free segment is expected to continue dominating the market over the forecast period.
PEST Analysis
- Political: The government policies regarding duty free allowances and number of items allowed duty free are key political factors. Harmonization of duty free policies across countries can impact market dynamics.
- Economic: Economic growth, tourism trends, disposable incomes, currency fluctuations are important economic factors affecting demand patterns in the duty free retailing market. Recovering economies post covid will drive market growth.
- Social: Changing demographics, lifestyle changes, consumer buying behavior are important social determinants. Rising global tourism and influx of international travelers augur well for the market.
- Technological: Advanced technologies like artificial intelligence, virtual reality and analytics enable personalized targeted customer engagement. E-commerce platforms are expanding reach in this space.
Key Takeaways
The global duty free retailing market is expected to witness high growth over the forecast period owing to recovery in global tourism post pandemic.
Regional Analysis: The Asia Pacific region is expected to witness fastest growth in the duty free retailing market led by China, Japan and India. Rising domestic and international travel from these countries will drive sales.
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. Dufry AG is the global market leader with widespread airport retail networks. LOTTE Duty Free is the strongest player in the Asia Pacific region. DFS Group is expanding its cruise line and luxury offerings.
