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APAC and Middle-East, fastest growing regions for duty-free retail marketing

With the growing low-cost airlines, there has been a surge in the middle-class travellers all across the world, thereby making Asia Pacific and Middle East as the fastest-growing regions for duty-free retail marketing, according to Vijay Sarathi, an analyst with the global technology research and advisory company Technavio.

As per him, China, India, Indonesia, South Korea and Sri Lanka were among some of the most sought after economical destinations in 2014.

“During the same period, it is estimated that International tourist inflow in APAC increased to almost 263 million travellers, and it has largely helped the market grow until 2019,” the analyst said.

A study by Technavio shows that global duty-free retailing is likely to reach around US$ 98 bln revenue by 2019. The report Global Duty-Free Retailing Market 2015-2019, provides a detailed analysis of market growth in terms of revenue and emerging market trends.

According to the report, in 2014, the global duty-free retailing market consisted of fashion accessories and hard luxury, perfume and cosmetics, wines and spirits, tobacco, and confectionery and fine food.

The three most important segments are listed below:

Fashion, accessories, and hard luxury:

It dominated the global duty free retailing market with a share of over 32%. The most in-demand products in this category include precious jewelry, briefcases, handbags, and shoes. Some of the more popular brands preferred by consumers include, Michael Kors, Armani, Fossil, Gucci, and Burberry.

As per Technavio researchers, Chinese tourists were the largest consumers of luxury brands last year, contributing around 25 per cent of global revenue. Most Chinese shoppers opt to travel abroad and shop at duty-free shops because the average price of luxury brands in China is 50% higher than most developed countries. This trend will likely continue and further augment luxury product sales over the next four years.

The perfumes and cosmetics segment:

It is one of the fastest-growing categories in the global duty-free retailing market. APAC and the Middle East are the key regions for this category, with some of the top-selling brands like Chanel, Christian Dior, Estee Lauder and Guerlain.

With around 21.5 per cent of revenue share in the cosmetics category, L’Oreal created a division especially for duty-free stores in 2013, describing the division as “the sixth continent”. In 2014, L’Oréal launched the Vichy and Kerastase brands in the duty-free retail segment in Asia, and also launched the Three-Minute Beauty program to engage with potential luxury product buyers at airports.

Wines and spirits segment:

Consumers find duty-free shops credible for buying premium liquors. Johnnie Walker, Diageo’s Scotch brand, continues to be the top-selling brand for the last two years, followed by Absolut, Jack Daniel’s, Chivas Regal, and others. The liquor category is expected to grow to USD 13.47 billion in 2019.

Innovations in store layouts, well trained staff on liquors, and availability of limited edition offerings will largely support the growth of this market. These developments mainly drive the popularity of this segment and the trend is likely to continue over the next four years.

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