Brand Strategy Work & Wellbeing

How China’s travel retail revival will impact the growth story of global brands

By Amit Bapna | Editor-at-large (APAC)

iClick Interactive Asia

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May 24, 2022 | 8 min read

iClick Interactive, a global martech player, has launched a new ‘Chinese Travel Shoppers 2022 White paper’. The white paper looks at the various facets of the Chinese travel retail market growth story and shines a light on the marketing trends that could help global brands wanting to attract Chinese travel shoppers.

After nearly two years of challenges for brands, there are green shoots of growth-led optimism, as many economies are trying to rebuild and restore the confidence of the citizens.

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The emergence of Hainan as the top choice for shopping and tourism

One such growth story has been the travel retail industry in China, which has managed to remain resilient even as the global markets were badly impacted by the pandemic. While the largest global travel retailers each saw at least a 38% drop from 2019 to 2020, China’s travel retail market only saw a 4.8% drop during the same years. In 2021, Chinese travel retail consumption shifted to domestic tourism and China’s duty-free market achieved 66.8% year-on-year growth.

With domestic travel mainly remaining open during the pandemic in China, except for occasional city-wide lockdowns, the domestic duty-free market has continued to grow at a rapid clip. According to estimates, China’s travel retail market is currently foreseen to grow to RMB 150 billion ($24bn) by 2025.

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The resilience has been backed by the overall continued growth in domestic tourism, as well as sustained initiatives in areas like Hainan that have emerged as fertile opportunities for global brands to invest in.

Hainan, famous as the southernmost point of China, is an island province that is known for its tropical climate, beach resorts, and tourism-friendly topography – and is at the center of China’s retail tourism growth story. Between 2020 and 2021, Hainan alone experienced an 83% increase in sales of duty-free goods. In 2021, the number of shoppers rose 73% year-on-year to nearly 10 million, and the number of duty-free items purchased increased 71% year-on-year to nearly 53.5 million.

The white paper reveals domestic travel in China is likely to thrive even after the pandemic is over, with the emergence of Hainan as the top choice for shopping and tourism. The growth of the Hainan province as a buzzing center of activity has been aided by the government's duty-free initiatives as well as the push on infrastructure, regulatory framework, etc.

For example, the emergence of Hainan’s offshore duty-free market has been one such powerful story in the making. According to the Department of Commerce of Hainan Province, 2021 sales from the 10 duty-free stores in Hainan were RMB 60.17 billion, an increase of 84% year-on-year, and the number of duty-free shoppers was 9.68 million, up 73% year-on-year.

According to the report, Hainan Free Trade Port (FTP) is on track to becoming the world’s biggest duty-free market – and it already is the largest special economic zone (SEZ) in China. As a part of the master plan for the construction of Hainan FTP, three sectors are going to see a sizable growth opportunity coming to them: tourism, modern service, and the high-tech industries.

Opportunities have been created to encourage the travel ecosystem in this part. For instance, the application of the tax-free shopping policy for Hainan’s offshore passengers has produced direct benefits to the development of the travel retail industry – one of them being an 84% year-on-year increase in sales from 10 duty-free stores.

To aid the growth of the destination, the government has announced a system of trade liberalization and facilitation of investment, along with ‘zero tariffs’ as a means of easing restrictions on foreign investment access to the market. In addition, barriers to trade in services have been removed and tax incentives are helping catalyze the growth further.

With all the infrastructure build-up, Hainan’s emergence as the tourism hub is likely to be a boon for marketers and brand owners as well. They can leverage this opportunity across the spectrum - from yacht tours to digital tourism and much more.

All in all, the future for retail domestic travel in China looks bright and all set to break the growth ceiling of last couple of years.

The whitepaper also analyzed Chinese travel retail shoppers by demographics, psychographics, shopping behaviors, and mobile usage, among other parameters.

As part of the research, four key types of domestic travelers were identified: the family, the solo, the small town youth, and the Sanya traveler. The paper deep dives into the demographics, psychographic, and behavioral trends of each category, using iClick’s proprietary market intelligence platform, iAudience, all of which can be a valuable repository in helping to evaluate the future of those looking at being a part of the Chinese growth story.

Readers can download the whitepaper to benefit from a deeper understanding of iClick’s sophisticated data capabilities and extensive EY industry knowledge and unravel the growth opportunities of the Chinese travel retail and duty-free sector.

Brand Strategy Work & Wellbeing

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