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NEWS Last modified on May 8, 2018

Asia-Pacific leads the way as global duty free sales exceed $68 billion

Global duty free and travel retail sales reached $68.6 billion in 2017, according to preliminary figures from Generation Research.

The figures were revealed today by TFWA president, Erik Juul-Mortensen, in his welcome address to delegates at this year’s TFWA Asia Pacific Conference in Singapore.

“That’s an encouraging increase of 8.1% on the previous year,” he said.

Yet again, the powerhouse region was Asia-Pacific, delivering sales of $30.6 billion, which was an impressive 11.6 % increase on the previous year.

“With this performance, Asia-Pacific continues to lead the world with a 45% share of global sales," noted Juul-Mortensen.
DXB girl
According to TFWA, the performance of the industry had been influenced by at least two important background factors.

Firstly, the potential customer base continued to grow, and figures from ACIl data shows a robust rate of growth at 8.4% for 2017, albeit at a slower rate than 2016.

“Some major airports in this region were well ahead of this performance. For example, Kuala Lumpur airport saw its international passengers grow by 14.7% and Narita by 13.6%, he said.

"Singapore Changi, Bangkok Suvarnabhumi, New Delhi, Jakarta and Guangzhou all broke through the 60 million passengers total, and both Shanghai and Hong Kong surpassed 70 million.”

The second background factor is, said Juul-Mortensen, global economic activity. 
“As the International Monetary Fund predicted, global economic activity strengthened through 2017 with global output estimated to have grown by 3.8%," he told delegates.

"Looking forward, there are positive background factors which will continue to influence our performance. The IMF’s global growth forecasts for 2018 and 2019 have been revised upwards to 3.9%.

"Today, we are enjoying improving personal economic prospects and a middle class that is growing everywhere.

“We have ever-increasing international passenger traffic, inbound and outbound, with a young generation of travellers possessing disposable incomes of which their parents could only dream.”

But even against this very positive background, there is a need for an evolution of our industry, and there are a number of reasons for this, he stated.
“The IMF itself sounds a note of caution, stressing that multi-lateral cooperation remains vital for continuing the global recovery and that geopolitical tensions and uncertainty in some countries still pose downside risks," remarked TFWA's chief.

"The world is still learning to work with the Trump administration and its attitude to global trade, especially with China.

"The UK’s Brexit debate still leaves that country’s future global trading status uncertain. And relations between South Korea and China, and North Korea and everybody, remain highly delicate.”

The second reason for the need of evolution is that the pressures of the duty free and travel retail industry have arguably never been greater.

“In recent months, the potential damage of the airport business model’s heavy demands upon concession operators has been felt especially strongly in this region," he added.

"Some contracts have been exited prematurely, and others have been renegotiated to less onerous rental terms."
Sydney duty free
Thirdly, the industry’svalue proposition remains under threat, as is its ability to compete convincingly with m- and e-commerce. Virtually every retail sector with a bricks and mortar component is having to redefine how they do business with consumers, continued Juul-Mortensen.

“Today, we in duty free and travel retail are embracing digital as the key driver enabling us to connect with our customers seamlessly and continuously.New rules do not mean extinction of the kind of retail our industry is based on.

"In fact evidence today suggests that domestic retail is far more under threat, but the impact of m-commerce upon us is dramatic and we do need to quicken our pace of evolution and adapt more quickly to the pressure of current business practices which are accelerating faster here than anywhere else.”

Digital engagement is, said Juul-Mortensen, the perfect way to establish relationships with duty free and travel retail customers.

He concluded: “Not surprisingly, airports are investing massively in technology to provide a constant, relevant stream of communication to these digitally-connected passengers.

"Integrated POS and CRM systems, i-beacon technology, wayfinding solutions and omni-channel commerce solution providers have made the passenger reachable whenever they are in the vicinity of the airport or duty free shop.

"We need to ensure we are part of that digital ecosystem.”



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