Duty free retailing refers to the selling of goods such as tobacco, alcohol, fragrances, and luxury goods to international travelers without the assessment of duties or taxes. Duty Free retailing offers consumers an opportunity to purchase high-end goods at discounted prices. With hectic lifestyles, consumers prefer one-stop shopping and this fuelling the growth of duty free retailing globally.
The global Duty Free Retailing Market is estimated to be valued at US$ 38.95 Bn in 2023 and is expected to exhibit a CAGR of 8.6% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market Opportunity:
Online Shopping Opportunities: With rising popularity of online shopping, duty free retailers have started offering their products online. This provides an opportunity for travelers to pre-book or pre-order items even before reaching an airport. It allows customers to compare prices and products online. Digital platforms also help retailers in expanding their consumer base beyond travelers. The availability of duty free products online from the convenience of one's home is expected to drive the growth of duty free retailing market during the forecast period. Retailers focusing on strengthening their online presence and omnichannel capabilities can benefit significantly from this opportunity.
Porter's Analysis
Threat of new entrants: The threat of new entrants in the duty free retailing market is moderate. Establishing a new duty free shop requires high capital investment for licenses, real estate, product procurement etc. However, the market is growing at a robust pace attracting new private players.
Bargaining power of buyers: The bargaining power of buyers in the duty free retailing market is high. Buyers have a wide range of product options from different duty free shops at airports and seaports. They can easily compare prices.
Bargaining power of suppliers: The bargaining power of suppliers is moderate. While there are many brand manufacturers, top brands have some influence over suppliers due to their market dominance.
Threat of new substitutes: The threat of substitutes is low. There are limited alternatives to duty free shopping experience while travelling internationally.
Competitive rivalry: The competitive rivalry is high among major global players and regional operators. They compete on factors like product ranges, pricing, customer service, exclusivity etc.
SWOT Analysis
Strength: Duty free shops have a captive customer base at international transit points. They offer exclusive high-end brands and large product assortment not easily available elsewhere.
Weakness: Over-reliance on travel retail market exposes business to volatility during economic downturns affecting passenger traffic. Seasonal demand impacts profitability.
Opportunity: Emergence of new international airports and seaports in developing markets offers greenfield opportunities. Growth of duty paid travel retail and cross-border e-commerce expands addressable market.
Threats: Trade wars and rising geopolitical tensions impact cross-border travel. Tighter regulatory norms on tobacco and alcohol sale pose challenges. Spread of pandemic diseases curb passenger traffic.
Key Takeaways
The global duty free retailing market is expected to witness high growth over the forecast period driven by rising international tourism and expansion of global airports.
Regional Analysis: The Asia Pacific region currently dominates the market supported by robust travel retail growth in China and Southeast Asian countries. Air passenger traffic recovery in the region post pandemic will further accelerate the market.
Key players operating in the duty free retailing market are Dufry AG, LOTTE Duty Free Company, DFS Group Limited, Gebr. Heinemann SE & Co. KG, The Shilla Duty Free, The King Power International Group, James Richardson Corporation Pty Ltd., Duty Free Americas, Inc., Flemingo International Ltd., Dubai Duty Free, and China Duty Free Group Co., Ltd. Dufry AG leads the global market and is expanding its airport retail footprint through acquisitions. Regional players are strengthening their positions through joint ventures with global brands. Market leaders focus on digital innovations, multiproduct categories and luxury brands to boost revenue per passenger.
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