World Market for Duty-Free: Unlocking Value and New Opportunities

March 2023

The outlook for world duty-free looks rosy, as pent-up demand and the recent reopening of China are powering tourism recovery, despite the headwinds caused by the cost-of-living crisis. Duty-free players are diversifying their source markets, expanding their global footprints, embracing omnichannel, as well as delivering immersive retail experiences. Sustainability strategies are increasingly being adopted to ensure that decarbonisation takes place across the supply chain.

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Key findings

Full steam ahead

Global sales of duty-free are forecast to reach USD117 billion at constant 2022 prices in 2023. The success of global duty-free sales is intrinsically linked to tourism flows, and travel is back and powering forward, as even regions slow off the mark, like Asia Pacific, are moving into full recovery, with the removal of travel restrictions and the recent reopening of China, which bodes well for duty-free.

Omnichannel optimisation

A true omnichannel duty-free shopping experience must be created through integration and innovation, where each channel is used to support and supplement the other. This will provide a truly consistent, seamless experience for consumers.

UK to become a key source market?

Duty-free sales in Europe have been led by luxury goods sales to long-haul visitors, as duty-free sales within the EU bloc have generally not been available. However, post-Brexit, the UK has opened up as a key source market located closer to home, providing an opportunity for duty-free shopping, an opportunity not taken by the UK, which ended VAT-reclaim sales in 2021.

China, and looking beyond China

China is a key source market in Asia Pacific; however, as the Chinese government plans to use duty-free as a vehicle to boost domestic consumption, Hainan will not be the only duty-free destination in the country going forward. Diversifying the customer base, such as by attracting domestic consumption and alternative source markets in the region, will be key.

 Creative future

The outlook for duty-free players is rosy; however, a sharper focus on operational efficiencies for sustainability, creating immersive retail experiences that blend the virtual and real world, and meeting consumers where they are, such as in the online channel, will be critical for future success.

Scope
Key findings
Global duty-free sales set for recovery by 2025
Regional sales dominated by China’s passion for domestic duty-free
Key markets for inbound duty-free sales led by Australia and South Korea
Fate of inbound duty-free strongly linked to Chinese outbound tourism spending
Popular product categories quicker to recover
Outbound duty-free spending boom forecast in 2023 driven by Asia
Changing consumer trends impact shopping behaviour post-pandemic
Shopping for quality appeals at either end of the income spectrum
SWOT analysis
The future of duty-free shopping
Tourism rebound brings a much needed boost for duty-free shopping
L’Oréal Travel Retail and TripAdvisor strike a partnership
Duty-free shoppers worldwide bet on luxury products
Evolution of loyalty programmes and cross-border travel
Lagardère Travel Retail Peru: reimagining the shopping space concept
Emerging technologies set to transform duty-free shopping
Lotte Duty Free taps into the metaverse
Cities attracting more downtown multi-brand duty-free shopping
Duty-free zones: ambitious plans that seek to diversify and expand reach
Strategic priorities of global players
Lotte Duty Free: focusing on Southeast Asia and K-pop culture
Dubai Duty Free benefiting from the strong performance of its home city
Gebr Heinemann banking on increased focus on loyalty and digitalisation
Europe’s leading travel retailers enjoy buoyant international demand
Case study: Dufry/Autogrill – combined strength to navigate uncertainty
Future store concepts go all out for digital, experiential and sustainable
DFS: partners with the next gen of social influencers to meet consumers where they are
European duty-free market overview
Europe’s international source markets are key to success
Luxury goods central to VAT-reclaim sales
China and Gulf states are key source markets
UK turns down duty-free opportunity
UK travellers become an opportunity post-Brexit
Duty-free creates virtuous circle for Åland islands tourism
More European domestic duty-free destinations
Global Blue: connecting retailers and travellers when making VAT-free purchases
Market overview: Asia Pacific
China is the key source market for the region, with a continuously growing appetite
China’s duty-free haven Hainan is far from being a mature market
China: Government policies encourage domestic duty-free
SWOT analysis of Chinese consumers’ outbound duty-free spending
Vietnam plans to set up duty-free zone in Da Nang to be opened by 2027
Increasing focus on domestic duty-free to diversify customer base
Alternative source markets that can be developed in the region
DFS Group: Leading in providing luxurious experiential retail experience in duty-free
Key takeaways: opportunities to explore
Call to action for duty-free

Travel

Travel encompasses several categories including tourism flows, lodging, travel modes, in-destination spending and booking.

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