Resilience and revitalisation: How to tap into the domestic duty free opportunities in China 

This post was done in collaboration with iClick Interactive. 

Hainan Free Trade Port is set to become the new duty free shopping hub as the domestic tourism market continues to thrive in China, in stark contrast to the massive decline in sales of the big four international duty free groups.

COVID-19 poses challenges but also invites opportunities to the Chinese travel shopping industry
While the rest of the world remained suppressed by the pandemic in 2021, China’s economy showed great vitality. From 2019 to 2020, the largest global travel retailers each saw at least a 38% drop, and yet China’s travel retail market only saw a 4.8% drop during the same years, followed by a 66.8% growth in the following year and is predicted to grow to RMB 150 billion (US $24 billion) by 2025.

The market has seen drastic changes in terms of travel retail destinations, duty free policies, digitalisation, and consumer profiles since 2020, making it ever so important for marketers to keep up with Chinese travel shopping market trends to stay ahead of the game.

Hainan Free Trade Port: Domestic duty free shopping is on the rise
While it is on track to become the world’s largest duty free market within the next two years, Hainan’s boom is challenging international duty free destinations like South Korea and Japan. Between 2020 and 2021, Hainan alone experienced an 83% increase in sales of duty free goods.

Meanwhile, the government is making endeavours to optimise Hainan’s business environment. The “Master Plan for the Construction of Hainan Free Trade Port,” issued in 2020, set the foundation for enormous progress over the past two years. Since 2018, Hainan has added more than 763,000 market entities and created over 233,000 job opportunities.

As the opening-up of Hainan brings incredible business opportunities to the local market, the government has set out to create a law-based business environment. Therefore, marketers and brands related to the industry need to comply with compliance requirements and understand how to grasp the opportunities under Hainan’s new rules.
Recovery of China’s consumer market is underway
China’s economy is undergoing an optimistic recovery, with a nominal increase of 9.1% in disposable income per capita and 13.6% in consumption expenditure in 2021. Under the context of COVID-19, the digital transformation of travel retailers has accelerated as well as incentives like loyalty programmes. Digital marketing spending in China is projected to grow to RMB 963 billion (US $151 billion) in 2024.


Get to know the four key types of new Chinese travel shoppers

Due to the international travel ban and the expansion of the domestic duty free market, Chinese outbound travel shoppers are shifting focus to domestic outlets. Notably, the number of domestic trips is projected to keep increasing with an estimation of 10 billion by 2025.

iClick’s proprietary “iAudience” market intelligence platform has identified four key groups of domestic travel shoppers:

1. The family trip: travellers who prefer travelling with family members, which accounts for the majority of Chinese travellers
2. The solo trip: independent travellers, who accounted for 96% of inbound travel and 50% of outbound travel in 2019 
3. The small-town youth: young people from third-tier and fourth-tier cities, which accounted for 60% of travel consumption during the 2021's Labor Day Golden Week
4. The Sanya traveller: travellers who look for luxurious shopping experiences

Each of the groups is with distinguished demographics, behaviours, and interest categories, which are covered in detail in the Chinese Travel Shoppers 2022 Whitepaper.
Implications for marketers targeting Chinese travel shoppers

1. Brands must embrace digitalisation to meet their consumers online by establishing a strong social media presence and online-to-offline (O2O) experience. 
2. Brands must keep up with the ever-changing behaviours of Chinese travel retail shoppers and adapt marketing strategies accordingly 
3. Shift focus from international to domestic tourism – Brands should take advantage of domestic opportunities like reaching out to potential customers through domestic duty free platforms

Download the full “Chinese Travel Shoppers 2022 Whitepaper” to read the detailed analysis of the modern Chinese travel retail shoppers, learn how to navigate Hainan’s duty free ecosystem, and uncover how to reach travel retail consumers through digitalisation.