Hainan policies brighten duty-free group's prospects

Implementation of new favorable policies in Hainan province has boosted sales and profits of China Duty Free Group, the country's largest operator of duty-free stores.

Financially stronger now, CDFG plans to open a new duty-free shopping mall in Haikou, capital of Hainan, in the next few years.

The planned mall will offer comprehensive range of merchandise, it said. Currently, it has four duty-free stores in Sanya, Haikou and Boao in the province.

"The development potential of Hainan is beyond imagination. We are highly confident in the booming growth of China's travel retail market, and we hope to introduce more brands and limited-edition products in China with cheaper prices, and further satisfy the demand of Chinese consumers," said Charles Chen, president of China Duty Free Group.

With more international brands and products available and more discounted prices offered in Hainan duty-free shopping, Chinese consumers have shown their enthusiasm for shopping.

"Hainan has become one of the most popular travel destinations," said Liu Bin, general manager of CDFG(Sanya) Downtown Duty Free Store Co Ltd, a local arm of the parent company.

CDFG said its business model envisages sales driven by professional buyers of the company who will fly to Europe, the United States and other places to select products at annual order-placing meetings.

Starting July 1, Hainan increased its annual tax-free shopping quota from 30,000 yuan ($4,570) to 100,000 yuan per person. The range of duty-free goods has also expanded from 38 categories to 45, while the previous tax-free limit of 8,000 yuan for a single product has been lifted.

From July 1 to Oct 31, official data showed that Hainan's four duty-free shops saw sales revenues hit 12 billion yuan, surging 214 percent on a yearly basis.

The four stores together received 1.78 million customers and sold some 12.87 million units of duty-free merchandise, up 58.8 percent and 139.7 percent year-on-year, respectively, according to Haikou Customs.

Cosmetics, perfumes and jewelry top the category list of sales at Hainan duty-free stores in terms of the number of items sold.

Duty-free shopping has become an important driver to promote the growth of tourism industry in Hainan, and it has continuously injected new vitality into the domestic tourism industry, CDFG said.

In the duty-free shopping mall in Sanya, it is common to see customers lining up at the door of luxury stores like Gucci, Cartier and Tiffany.

Due to the COVID-19 pandemic and travel restrictions, many people can't travel abroad. In Hainan, it's more convenient for Chinese consumers to buy different kinds of latest products, benefiting from the new offshore duty-free policies introduced in Hainan, CDFG said.

With more than 30 years of growth in the duty-free market, CDFG has been improving its ability in purchasing, operations, marketing and digitalization. The company has established long-term cooperation with about 1,000 renowned brands, it said.

With more industry players joining the duty-free retail market, CDFG said the sector would grow bigger and become more competitive. Relying on the powerful tourism resources of its parent company, China Tourism Group, CDFG hopes to build the core competence in the tourism retail market globally and become a force to reckon with in the sector.

This year, CDFG is expected to top a list of global tourism retailers in terms of sales revenues, according to the Moodie Davitt Report, published by London-based Moodie International Ltd, a business-to-business publisher and information provider.

In the first half of this year, CDFG achieved sales revenue of 19.3 billion yuan. It was much higher than that of Swiss duty-free retailer Dufry and South Korea-based Lotte Duty Free, which were listed as the No 1 and No 2 players last year. In 2019, sales of CDFG were ranked fourth among duty-free operators globally.

CDFG said duty-free shopping in Hainan is becoming an effective tool to guide consumption flow back to China, as a large number of regular duty-free shoppers were those who used to shop abroad during their travels.

But because of COVID-19-related restrictions on travel, shopping abroad have found the going tough this year.

The Hainan shopping uptrend came against the backdrop of the nation's newly proposed dual-circulation development pattern, which sees China mainly relying on "internal circulation" for its long-term development, while placing equal emphasis on both the domestic and external markets as engines of economic growth.