Duty Free Retailing Market Report 2024 (Global Edition)

Market Dynamics of Duty Free Retailing

Key Drivers

• The rapid expansion of the tourism industry stimulates market expansion of duty-free retailing.

The number of inbound and departing travelers is expanding dramatically because of many reasons. Many people visit cities to experience the culture of museums, art galleries, architecture, boutiques, and restaurants. The natural scenery is also a big 'pull' for visitors, especially mountains like the Alps in Europe or stunning stretches of shoreline in the Mediterranean or Caribbean. Moreover, people today make more money than they did 20 years ago, and also full-time employees now receive paid leave for at least three weeks every year. This means they can afford to take more than one vacation each year. Furthermore, people have more flexibility in choosing where and when they want to travel as they possess more cars and feasible airplane and rail transport. This feasibility and amenities make it easy to boast in tourism.
Furthermore, the use of chartered aircraft has lowered the cost of international travel. Hence, the number of airport visitors is increasing internationally. A surge in local and international business travel, as well as sports travel, is a major element driving the size of the duty-free retail industry. The Summer Olympic Games, UEFA Euro, UEFA Champions League, and Premier Leagues are just a few of the significant events that draw large crowds from all over the world. Every year, sporting events are held in various nations throughout the world, boosting the number of foreign tourists and visitors, which boosts retail sales of luxury and branded goods, particularly through duty-free businesses. All the major European nations, as well as the Asia Pacific countries, particularly Malaysia, Singapore, Japan, and Thailand, draw a considerable number of people from across the world, thereby driving the duty-free retailing market sales.
For instance, Qatar Airways Group CEO Engr. Badr Mohammed Al Meer has praised Qatar Duty-Free's (QDF) performance in 2023 after the travel retailer recorded a 32% year-on-year revenue increase. The past year has been marked by a slew of new shop openings, many of which were channel 'firsts', as well as high-profile campaigns, activations, and marketing activities as QDF continued to expand its estate of more than 200 retail and dining outlets following a landmark year in 2022 for the FIFA World Cup Qatar 2022. Other highlights that raised the market growth included like the opening of Yannick Alléno's award-winning Louis Vuitton Lounge, TRBusiness was on the ground in Doha providing coverage as well as a newly opened Dolce & Gabbana boutique, a three-day World Chocolate Day campaign with Venchi, a National Lipstick Day campaign with MAC Cosmetics, and the unveiling of a brand-new food court featuring five international cuisine concepts. The travel merchant enhanced its visibility on the athletic scene by sponsoring the Qatar Grand Prix and provided a unique twist on the classic Qatari Souq experience with Souq Al Matar, which houses seven shops and two eateries. (Source: https://www.trbusiness.com/regional-news/middle-east/qdf-reports-32-sales-growth-laser-focused-on-retail-vision/247550)
Hence, the rise in tourism drives the market growth of the duty-free retailing market.

• Increasing incomes of the middle class, cities becoming more urbanized, and duty-free retail stores integrating technological advancements.

The worldwide duty-free and travel retail sectors are increasing as the middle class grows and cities become more urbanized. Growing disposable income, growing living standards, and the affordability and convenience of air travel are all contributing to an increase in middle-class travel and purchasing at duty-free stores. To grow the travel retail industry in the next years, the leading suppliers are developing consumer-focused businesses tailored to this end-user market. Middle-class consumers are the primary drivers of economic growth in developing countries such as China and India, and their purchasing power may promote the expansion of the global duty-free market.
Furthermore, the rise in middle-class median income will have an impact on middle-class consumers' buying habits, means of mobility, and demand for luxury products, boosting the expansion of the duty-free retail industry. Rapid urbanization and development will accelerate infrastructure construction and give access to more facilities in the global market. Moreover, the building of new ports and airports will boost the income of the duty-free retailing market. 
For instance, India's upper middle class is spending money on luxury automobiles, real estate, vacations, technology, and house upgrades. This increase occurs despite the emergence of a contrarian tendency. Indian customers are gravitating towards premium goods in a variety of categories, including personal care items like shampoos, phones, and SUVs. Premiumization has made a significant impact on middle-class Indian customers. (Source: https://timesofindia.indiatimes.com/business/india-business/why-indias-upper-middle-class-is-splashing-money-on-premium-products/articleshow/102916397.cms)
Moreover, due to the COVID-19 epidemic, consumer buying behaviour has rapidly shifted from offline to online retailers. As a result, major vendors in the global duty-free retailing business, such as Dufry AG, Delhi Duty-Free, and Dubai Duty-Free, have created websites to provide their clients with a hassle-free shopping experience, complete with promotional codes and discounts that will help attract a large number of users. Furthermore, technological integration has made it easier to observe human behaviour both online and offline, thanks to sophisticated analytics and increased personalization. An expansion in contactless purchasing experiences in the e-commerce travel retail industry, with an emphasis on zero-waste manufacturing and sustainable consumption habits, is expected to provide good market potential.
As a result, the rise in purchasing power of consumers alongside technological advances drives the market growth of the duty-free retailing market.

Key Restraint

• Currency fluctuation and disadvantageous exchange rates hamper the growth of the duty-free retailing market.

Travel retail markets are vulnerable to international currency fluctuations. Although companies operate in several countries and frequently trade in currencies with particular exchange rates, such as Euros, Dollars, and Pounds, they are vulnerable to global market fluctuations. These currencies are converted using the exchange rate for that given day. Depending on the shifting exchange rate, these worldwide market currency exchange swings may have a favourable or negative impact on travel retail firms, especially retail chains that sell luxury products. Exchange rate uncertainty during the COVID-19 epidemic is one of the major external reasons driving global economic inflation.    
For instance, Quartz reports that Burberry's mid-length Kensington trench costs 1,790 GBP (about $2,052) in the UK. However, in the United States, the identical coat costs $2,490. In China, attaining that characteristic gabardine appearance would cost 20,500 yuan or $2,827—roughly 32% more than buying it where the premium label was born.
While currencies are usually volatile, the dollar's sharp surge is distorting store prices substantially. During uncertain periods, investors have been buying dollars as reserves, and the US Federal Reserve has continued to raise interest rates to limit inflation, keeping the dollar high. Moreover, the euro is down 11% year so far against the dollar, while the British pound is down 16% which hampers the duty-free retailing industry.
Hence, it's a hassle for businesses, particularly those that offer high-end items. While customers may not object to large price discrepancies across nations for low-cost items such as toothpaste or cookies, when it comes to $2,000 shoes or a $5,000 coat, they will look for ways to price arbitrage. (Source: https://qz.com/heres-where-the-strong-dollar-is-making-luxury-goods-ch-1849679187)
Hence, in such a manner, currency fluctuations may cause a hindrance to the duty-free retailing market.

How did COVID-19 impact the Duty-Free Retailing Industry?

The COVID-19 epidemic had a substantial impact on the worldwide duty-free retail market's growth. The dramatic drop in air traffic, most notably in 2020, hampered aeronautical and non-aeronautical income, with airlines reducing capacity and people throughout the globe avoiding travel. Trade tensions and protectionism between China, Australia, the United States, and other trading partners are important concerns that are predicted to stifle product sales in these nations shortly. Governments are expected to utilize trade protectionism to reduce social tensions or dissatisfaction generated by the COVID-19 pandemic's impact on social disparities and employment. The COVID-19 problem caused a significant reduction in revenue for the tourist sector which eventually hampered the duty-free retailing industry. According to Nikkei Asia, a Tokyo-based financial newspaper, China International Travel Service (CITS), a Chinese travel agency company, saw a sharp decline in its first quarter of 2020, resulting in a huge net loss. (Source: https://asia.nikkei.com/Business/Travel-Leisure/China-group-tourism-revival-clouded-by-weak-economy)
 

Our study will explain complete manufacturing process along with major raw materials required to manufacture end-product. This report helps to make effective decisions determining product position and will assist you to understand opportunities and threats around the globe.

The Global Duty Free Retailing Market is witnessing significant growth in the near future.

In 2023, the Perfumes segment accounted for noticeable share of global Duty Free Retailing Market and is projected to experience significant growth in the near future.

The Airports segment is expected to expand at the significant CAGR retaining position throughout the forecast period.

Some of the key companies Duty Free Americas, China Duty Free Group Co.Ltd and others are focusing on its strategy building model to strengthen its product portfolio and expand its business in the global market.

Frequently Asked Questions