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The global duty free retail market size was valued at USD 35.87 billion in 2021. The market is projected to grow from USD 39.08 billion in 2022 to USD 72.23 billion by 2029, exhibiting a CAGR of 9.17% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering with Duty Free Retail experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a decline of 42.38% in 2020 as compared to 2019.
This market generates significant revenue for the aviation, tourism, and other travel-related industries worldwide. Airports typically derive nearly half of their total income from duty free and travel retailing. Duty free goods’ sales typically happen within international zones, notably seaports and airports. However, these goods can also be sold on ships or onboard aircraft with shoppers/travelers in transit.
Significant Decline in Product Demand Observed Due to COVID-19 Pandemic
The COVID-19 pandemic has been significantly affecting the global duty free retail market growth. The sudden decline in air traffic, most notably in 2020, impeded aeronautical and non-aeronautical revenue, with airlines cutting their capacities and individuals across countries avoiding travel. According to Airports Council International (ACI), a Canada-based international platform for representing airport standards and industry practices, total airport sales dropped by 35% to USD 14 billion in the first quarter of 2020 and by 90% to USD 39 billion in the second quarter of 2020.
Trade tension and trade protectionism between China and Australia & the U.S. or other trading partners is a major concern that is expected to hamper duty free sales across these countries in the near term. Governments are likely to employ the trade protectionism strategy to mitigate social tensions or any discontent caused by the COVID-19 pandemic on social inequalities and employment. Tourism is one of the hardest-hit industries by the COVID-19 crisis. According to Nikkei Asia, a Tokyo-based financial newspaper, China International Travel Service (CITS), a Chinese travel agency company, witnessed a decline of 44% to USD 1.08 billion (7.63 billion yuan) in its first quarter of 2020, falling to a net loss of USD 18.89 million (120.14 million yuan) from a profit of USD 0.36 billion (2.30 billion yuan) in the previous year.
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Increasing Demand for Duty Free Alcohol to Encourage Product Innovation
Recent years have witnessed considerable demand for duty free alcohol across countries, notably in Asia. The increasing demand is attributable to diversifying consumer buying habits, rapidly increasing international tourist arrivals, and rising spending among the middle-class population/travelers. The rising demand for premium liquor is creating heightened consumer interest in duty free alcohol worldwide at a macro level.
The alcohol category has also witnessed significant developments, most notably product launches, in recent years. For instance, in December 2021, Diageo, a U.K.-based alcohol company, partnered with Shenzhen Duty Free, a China-based duty free goods retailer, to launch its innovative whisky e-boutique. At a macro level, the growing demand for retail will boost duty free alcohol sales and other product types such as fashion accessories over the forecast period. Furthermore, the alcohol category is likely to encourage market key players to offer luxury and premium products.
Rapidly Expanding International Tourism Market to Favor Market Expansion
The proliferation and introduction of new international airports across countries are creating lucrative business opportunities for industry participants. For instance, in February 2021, the Airport Authority of India (AAI), an Indian governmental body that operates 125 airports, issued a construction permit of USD 135.07 million (INR 987 crore) for the first phase of an international airport named ‘Dholera’ in Gujarat. According to Global Aviation Summit 2019, the Civil Aviation Ministry’s ‘Indian Aviation’s Vision 2040’ claims that by 2040, India will have 190-200 operational airports. Delhi and Mumbai will each have three international airports, while the top 31 Indian cities will have two operating airports. The fleet of 622 airliners that traversed India in 2018 is expected to more than double to 2,359 aircraft by March 2040.
Increasing Number of New Air Routes in Asian Countries to Encourage New Players’ Entry
Numerous airlines across countries are expanding their international networks and establishing new airports as the world’s borders are gradually reopening amid the COVID-19 crisis. This factor is likely to encourage new players' entry, notably across Asia, in the foreseeable future. According to the Global Times, a Chinese English-language newspaper, China will begin a new round of airport construction projects in 2022. The projects range from airport expansion to airport construction. For instance, the fourth phase of the Shanghai Pudong International Airport expansion project formally began in January 2022. The airport is expected to house 130 million passengers per year by 2030.
Currency Fluctuations to Hamper Product Demand Globally
Duty free markets are sensitive to exchange rates among countries. Although they operate in several countries and often deal in numerous currencies, including Euros, Dollars, and Pound, which have specific exchange rates, they are subject to global market changes. These currencies are converted at the exchange rate of a particular day. The currency exchange fluctuations in the global market may positively or negatively affect duty free retail businesses, including retail chains that offer luxury goods, depending on the fluctuating exchange rate.
The uncertainty in exchange rates amid the COVID-19 pandemic is one of the significant external factors causing global economic inflation. According to the United Nations Children’s Fund (UNICEF), a U.S.-based non-profit agency providing humanitarian and development aid to children worldwide, Syria's economy witnessed an unprecedented decline in 2020, losing 74% of its value compared to 2019. The Syrian pound (SYP) depreciated by 11% due to fluctuation in currency exchange rates in November 2020 to SYP 2,638/USD.
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Rising Consumer Preference for Premium/Luxury Products to Trigger Demand for Perfumes
Based on type, the global market is segmented into perfumes, cosmetics, alcohol, cigarettes, and others. The perfumes segment is likely to dominate the global market share throughout the forecast period. Internationally reputed distribution channels offer luxury perfumes across duty free retail stores worldwide. Affluent global travelers typically visit duty free retail chains that offer perfumes of internationally reputed brands, including Prada, Hugo Boss, Gucci, Giorgio Armani, Al Haramain Dazzle Intense, Belle, Signature Rose, Signature Silver, and Khulasat Al Oud. Major distribution channels offer all perfume types, including Perfume or De Perfume, Eau De Perfume (EDP), Eau De Toilette (EDT), and Eau De Cologne (EDC).
The rising popularity of premium beauty is fueling the product demand in the cosmetics space, with a sizable number of disruptive brands focusing on product innovation. Luxury cosmetic brands, including L'Oréal Paris, Estée Lauder, Clinique, Chanel Beauty, Tom Ford, Clé de Peau, Armani Beauty, and Guerlain dominate the cosmetics category. Despite the popularity of premium/luxury cosmetics, prominent distribution channels offer a wide variety of mass-market products to stay competitive.
Rising Number of Shops at Airports Worldwide to Expedite Product Sales
Based on sales channel, airports, onboard aircraft, seaports, train stations, and others constitute the market segmentation. Airports dominate product sales worldwide. The mushrooming number of domestic and international airports across countries is favoring product sales through this distribution channel. Various developments within the ‘airports’ category highlight the increasing number of duty free stores across airports worldwide. For instance, in April 2022, Flemingo, a Dubai-based global travel retail operator, and Adani Group, an Indian integrated business conglomerate, announced their plan to establish a duty free shop at the Thiruvananthapuram International Airport by mid-May 2022. This strategic move (new establishment) also highlights the intensifying competition in the Indian market.
Seaports are also a major sales channel for duty free products worldwide, notably across Asian markets. As with airports, seaports also facilitate brands of various products to gain visibility across international markets. Recent developments in the ‘seaports’ category exhibit lucrative business opportunities for prospective industry participants. For instance, in November 2017, India Tourism Development Corporation Ltd (ITDC), a company operating under the Ministry of Tourism, had announced its plan to establish duty free shops across all prominent seaports before 2021.
Asia Pacific Duty Free Retail Market Size, 2021 (USD Billion)
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Based on geography, the global market is categorized into North America, Europe, Asia Pacific, South America, and Middle East & Africa.
The Asia Pacific market of Duty Free Retail is expected to witness significant growth throughout the forecast period. Recent developments across Asian countries could provide the potential opportunities for established and prospective duty free stores to launch a broad spectrum of innovative products. For instance, in its master plan dated June 1, 2020, China’s central government announced various policies aimed at establishing the Hainan Free Trade Port (Hainan FTP) on the country’s southern coast. The government also announced its plan to make Hainan FTP an internationally renowned free trade port by 2050. This strategic move is expected to favor domestic retail chains that offer a wide variety of Duty Free Retail products in the coming years.
Europe is expected to witness significant growth in the near future. Increasing luxury goods expenditure among tourists is a key driver favoring the regional market’s growth. As is the case across international markets, the easing of COVID-19 restrictions has caused airports across European countries to be configured to attract tourists/passengers to Duty Free Retail stores on the way to the departure lounge. Such configurations are likely to trigger discretionary purchases among travelers, which, in turn, will boost product sales in the coming years.
Led by the U.S., the North America Duty Free Retail market is principally driven by an influx of tourists paired with significantly high U.S. travel spending. According to the U.S. Travel Association, with approximately 2.3 billion person trips in the year, the U.S. domestic travel rose by 1.7% in 2019 compared to 2018. Canada is one of the key contributors to the North American market. According to the Canada Border Services Agency (CBSA), duty-free stores operate in approximately 53 locations across Canada, including international airports and land border locations.
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Product sales across the South American, Middle Eastern, and African markets are likely to witness an upward curve over the forecast timeframe owing to the rising consumer demand for premium/luxury perfumes. The UAE is the largest market for Duty Free Retail goods in the Middle East. Dubai is currently one of the most popular tourist destinations worldwide. This country also houses some of the world’s biggest Duty Free Retail shops.
New Product Launches and Partnership with Prominent Distribution Chains to Augment Product Visibility & Sales
Duty Free Retail industry participants have been adopting various competitive strategies, including new product launches and collaborations, helping stay abreast of the intensifying competition. In this respect, recent industry developments summarize the need for brands to employ strategies to overcome competitive rivalry. For instance, in January 2020, Lotte Duty Free, a South Korea-based retail store/distribution channel offering travel retail products, collaborated with domestic cosmetic brands, including Innisfree and AGE 20s to launch the Red Edition series (cosmetics). While luxury and premium brands target affluent travelers in Western countries, mid-market and smaller brands focus on expanding across Asian countries to stay competitive and increase their market shares.
An Infographic Representation of Duty Free Retail Market
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The report analyzes the market in-depth and highlights crucial aspects such as prominent companies, product types, and sales channels. Besides this, the research report provides insights into the market trends and highlights significant industry developments. In addition to the aspects mentioned earlier, the report encompasses several factors contributing to the market's growth in recent years.
Value (USD Billion)
By Sales Channel
Fortune Business Insights says that the worldwide market size was USD 35.87 billion in 2021 and is anticipated to reach USD 72.23 billion by 2029.
In 2021, the global market value stood at USD 35.87 billion.
Ascending at a CAGR of 9.17%, the global market will exhibit steady growth over the forecast period (2022-2029).
By type, the perfumes segment is expected to dominate the market throughout the forecast period (2022-2029).
The rapidly expanding international tourism market is accelerating the market growth.
China Duty Free Group, Lotte Duty Free, The Shilla Duty Free, Dufry, and DFS Group are the leading companies.
Asia Pacific dominated the global market in 2021.
The increasing number of domestic and international airports across countries is favoring the market expansion.
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