Rebound and revival: Navigating the post-pandemic landscape of China’s travel retail market

Despite the setbacks due to unpredictable outbreaks in 2022, the 2023 Chinese New Year travel period brought a positive outlook for the travel retail industry as restrictions have lifted, with 308 million domestic trips and tourism revenue reaching RMB375.8 billion (US$54.9 billion), up 23.1% and 30% year-on-year respectively.

After the announcement of relaxed pandemic control measures, outbound travel spiked with 2.87 million outbound trips during the new year period, an increase of 121% year-on-year. Notably, Southeast Asia has garnered attention as a popular travel destination as Chinese outbound travel rebounds, among which Thailand is the most frequently searched place following Vietnam, Indonesia, Singapore, and Cambodia.

As we enter this new phase in the post-pandemic era, travel retailers are faced with a new normal: one where consumer demographics, behaviour, and expectations have shifted, and digital technologies have become more important than ever. Therefore, it is important for brands and travel retailers to adapt their strategies to succeed in this new landscape.

Hainan has emerged as a major luxury consumption mecca

The pandemic and new duty-free policies have given a boost to duty free destinations in China, with Hainan's outlying islands becoming a "shopping paradise" for tourists. In 2021, Hainan duty free stores saw an increase in sales of 84% year-on-year, reaching RMB60.2 billion (US$ 8.9 billion), with 6.7 million shoppers.

While the sales of the four biggest duty-free retailers worldwide declined, Hainan duty-free stores continued to grow. Owning six duty-free business entities and 12 duty-free stores on the outlying islands, Hainan reached RMB 90.6 billion (US$ 13.2 billion) in sales of duty-free goods from July 2020 to June 2022. As of present, eight enterprises are qualified to operate duty free business on Hainan island among which CDFG (中免集团) is the largest worldwide.

Leverage digital technologies to engage and convert Chinese travel shoppers

China had 1.05 billion internet users as of June 2022, with 99.7% using mobile phones to access the internet, exhibiting increasing purchasing power as well as a growing number of online platforms. As diversified as the eCommerce platforms have become, Chinese consumers are increasingly shopping through short video live-streaming, fresh food delivery, and community group buying. Notably, "content seeding" has become a major part of social media marketing, driving the country's digital advertising spending, especially on Weibo and Xiaohongshu.

Chinese digital giants are increasingly stepping their foot into China’s duty-free scene. For instance, Tencent has signed a partnership agreement with Dubai Duty-Free, leveraging Tencent's expertise and digital platforms to enhance the shopping and travel experience of Chinese visitors to DDF. ByteDance's short video app Douyin has also become a key channel for duty-free retailers and brands to advertise to customers and collaborate with KOLs. As the travel retail industry in China becomes increasingly digitalised, it is important for brands to leverage online travel agencies (OTAs), entertainment, and social media platforms as they play critical roles throughout the whole journey of Chinese consumers’ travel experience.

Implications for marketers targeting Chinese traveling consumers

While the outlook for domestic travel retail consumption is optimistic, the consumption behaviours of Chinese travel shoppers are continuously evolving due to the continuous advancement of digital technology. Here’s what marketers need to know to reach Chinese duty-free consumers.

1. Attracted to experiential consumption, including travel, food, and nightlife, China’s Gen Z is becoming an important component of travel consumption as more of them enter the workplace with more disposable income.
2. It is anticipated that the May Day holiday will be a peak time for outbound travel to Southeast Asia following the fall Golden Week, which brands and marketers could prepare for in advance.
3. Although offline stores are still the main avenue for purchases, a lot of marketing and consumer activities have moved to the online space, making it ever-so-important for marketers and brands to integrate online and offline experiences through leveraging digital technologies for Chinese consumers to boost sales.
4. In the ever-changing eCommerce industry, it is critical for marketers and brands to plan ahead for common challenges in terms of changes in laws and regulations.

The full report of “A Practical Guide to Engaging with Chinese Travelers: China Travel Retail Market Facts and Tips to Know [2023 Edition] is available for download on iClick’s website.

This article is sponsored by iClick.