Duty free retailing refers to the tax and duty exemption benefit offered to international travelers while purchasing goods such as liquor, cosmetics, fragrances, and fashion accessories. Duty free shops are located within airports and on board departing international flights, seaports, train stations and also adjacent border areas. For instance, travelers flying out of the United Kingdom to destinations outside the European Union limits can claim VAT refund on goods up to the value of GBP 300. Also, international travelers on cruise ships can avail exemptions on alcohol, tobacco, and fuel purchases when arriving or departing ports located outside their country of residence.
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:
The duty free retailing industry has noted some key trends that are affecting market growth such as the growth of experiential shopping. Consumers have moved beyond transactional shopping and seek engaging experiences making duty free shops add entertainment areas offering dining services and live music performances to captivate travelers. Meanwhile, digitization is enabling seamless shopping experiences through mobile applications. Leading duty free retailers have developed mobile apps that allow travelers to pre-book products, check inventory levels in departure stores and some apps even offer virtual stores with augmented reality technologies for trying out products. Further, sustainability has become a top priority for travelers with duty free retailers responding through expanded eco-friendly product ranges, recyclable packaging and in-store recycling/waste management initiatives.
- Threat of new entrants: Entry barriers in the duty free retailing market are moderate as the market requires high capital investment for setting up outlets at airports and seaports. Also, established players enjoy brand recognition and economies of scale.
- Bargaining power of buyers: Buyers have moderate bargaining power as there are established brands in the market and customers usually purchase limited variety of goods from duty free stores during travel.
- Bargaining power of suppliers: Suppliers have low bargaining power as there are many substitute suppliers for most product categories sold in duty free stores.
- Threat of new substitutes: Threat of substitution is low as duty free retailing offers unique shopping experience along with tax savings.
- Competitive rivalry: Competition is high among major international players operating across multiple regions. Players compete based on diverse product portfolio, brand, price, and customer experience.
The global duty free retailing market is expected to witness high growth over the forecast period. Asia Pacific is expected to be the fastest growing as well as the largest market during the forecast period.
Regional analysis: Asia Pacific accounts for around 40% share of global duty free retail sales led by strong performance of key airports in China, Japan, and South Korea. Airport duty free stores contribute around 75-80% share in Asia Pacific owing to robust aviation growth.
Key players: Key players operating in the duty free retailing 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 the largest player with worldwide presence.