In the retail industry, the concept of duty-free retailing has expanded from small luxury shops to one of the highest-earning sectors. Airports have become prominent places that are often equipped with shops and amenities for travelers and tourists to buy necessary goods. This is emphasizing airports as well as airlines to increase their revenues through the sale of the airport and onboard amenities.
The duty-free retailing market is expected to increase by generating a revenue of $139.4 billion by 2026 with a CAGR of 8.2% over the forecast period.
According to Research Dive, duty-free retailing refers to the retailing of products that are available to travelers at the airport or sea terminals with the exemption of various taxes and excise duties. The products are sold duty-free and have certain stipulations as per the jurisdiction. These products are mostly found at the international airport and sea terminal and depending on the country’s laws the rules are set for the prices of the products.
Some countries have made provisions for duty-free retail stores within their road borders so that travelers using buses or private vehicles can also get access to these stores. Duty-free retailing stores give travelers the access to purchase luxurious products at a reasonable cost.
The availability of the product at a cheaper price as compared to that at retail shops is predicted to be the major driving factor for the duty-free retailing market. Many major companies showcase their product in order to increase their brand awareness at a reasonable rate which helps in increasing the reach to the customer. Moreover, the rise in tourism due to the rise in the disposable income among the population is predicted to boost the overall growth of the market in the forecast period.
The biggest restraints for the duty-free retailing market are the rules and regulations set by the government. The duty-free retail shops play a vital role in modern airport terminals. Due to various reasons, the entry barrier for the small and medium enterprises (SMEs) and the local manufacturer is bit tougher which will hamper the growth of the duty-free retailing market over the forecast period. Moreover, the language barrier between the buyer and the supplier is also predicted to hamper the growth of the market in the forecast period.
- The cosmetic and personal care product type is estimated to be the most profitable segment in the forecast year. The cosmetic and personal care segment is predicted to generate a revenue of $43,252.4 million by 2026 with a CAGR of 7.6% over the forecast period. A large number of travellers prefer expensive items for their personal care. The rise in the use of cosmetic and personal care products among the population and access to branded and trustworthy products at a cheaper price is predicted to boost the overall growth of the market in the forecast period.
- The airport distribution channel is predicted to have the highest growth rate over the forecast period. The airport distribution channel is predicted to grow at a CAGR of 8.5% by generating a revenue of $98,323.5 million by 2026. The airport distribution channel is the most preferred channel among the major companies to showcase their product and increase their brand awareness. A large number of customers can be pitched at airports rather than other distribution channels, and this is predicted to boost the overall growth of the market over the forecast period.
- The asia-Pacific market is predicted to have the highest growth rate in the forecast period. The asia-Pacific market is predicted to grow at a CAGR of 7.9% by generating a revenue of $59,538.4 million by 2026. The market is predicted to grow due to major players expanding their business in the region and an increase in the disposable income among the middle-class population is predicted to boost the duty-free retailing market in the forecast period. The Europe market is predicted to experience noteworthy market growth over the forecast period. The Europe region market is predicted to grow at a CAGR of 8.8% by generating a revenue of $36,874.1million by 2026. The rise in the number of tourists is also predicted to propel the growth of the Europe market over the forecast period.
Potential Future of Duty-Free Retailing Market
The global duty-free retailing market is estimated to witness positive growth during the forecast period. Increasing shopping experiences of customers and several services provide to them by major market players in the industry are predicted to drive the demand for the market from 2019 to 2026. The duty-free retailing market is also considered one of the largest contributors to non-aeronautical income. However, strict regulations of governments in various countries for duty-free retailing on products is considered to be a major factor restricting the growth of the duty-free retailing market.
The major key players in the market are
1. Duty-Free Americas
2. Shinsegae Duty-free
3. Aer Rianta International
4. Dubai Duty-Free
5. China Duty-Free Group Co., Ltd.
6. Lotte Hotel.
7. Dufry AG
8. Hyundai Department Store Duty-Free
9. Lagardère group
An inflight e-commerce website was launched by AirAsia in 2018 by partnering with Plaza Bali Duty & Tax-Free. The website is named ‘OUR SHOP’, where customers can explore various products with multiple delivery options from downtown, onboard, and airport to home delivery.