February 28, 2024

Duty Free Retailing is Driven by Increase in International Tourism

Duty Free Retailing refers to the retail outlets located within secure zones such as international airports and seaports, where specific commodities such as alcohol, tobacco, perfumes, cosmetics and fashion accessories are exempt from the payment of certain local or national taxes and duties. Duty free retailers offer a wide range of duty paid and duty free branded goods to the international travelers. Rise in disposable incomes and spending power of consumers along with rapid globalization and liberalization has led to significant increase in international tourism and airport footfall over the years, fueling demand for duty free retailing globally.

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 key trends:

One of the key trends in the duty free retailing market is growing expansion and modernization of airport infrastructure across emerging nations. Several developing countries are investing heavily in expanding and upgrading existing airport facilities to boost tourism and travel. For instance, China plans to invest USD 57 billion by 2035 to build over 200 new airports. Similarly, India has planned expansion of 35 non-metro airports at a projected cost of over USD 6 billion. This ongoing airport infrastructure upgradation is expected to significantly drive traffic at duty free shops located within the airport premises over the coming years.

Porter’s Analysis

  • Threat of new entrants: The duty free retailing market has a moderate threat of new entrants due to high capital requirements for inventory, distribution, and retail networks. However, new players can leverage online platforms to enter the market at relatively low costs.
  • Bargaining power of buyers: Buyers have moderate bargaining power due to the availability of alternatives and increasing price sensitivity as economic conditions worsen. However, the specialized offerings, discounts, and personalized services provided by established duty free retailers reduce the potential for buyers to switch retailers.
  • Bargaining power of suppliers: Suppliers have low bargaining power in the duty free retailing market due to the availability of substitute products and suppliers. Most supplies are commoditized which allows duty free retailers to source them from multiple suppliers.
  • Threat of new substitutes: The threat of new substitutes is moderate as other shopping avenues continue to emerge. However, the unique duty-free proposition involving substantial discounts and a specialized product range creates high customer demand.
  • Competitive rivalry: The market features strong competition among major global players. Players compete based on offerings, prices, branding, retail networks, customer loyalty programs, and brand recognition.

Key Takeaways

The global duty free retailing market is expected to witness high growth over the forecast period.

Regional analysis: The Asia Pacific region is expected to dominate the market during the forecast period led by China. Presence of emerging economies coupled with increasing disposable incomes and international travel in the region creates significant opportunities. Additionally, Europe and North America are expected to experience steady growth supported by rollout of innovative digital solutions and redevelopment of existing airport infrastructure across major economies.

Key players: 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 is one of the leading players globally deploying mergers and acquisitions as a key strategy for market expansion.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it