Duty free retailing refers to the sale of goods without payment of certain local or national taxes and duties. Typically, these goods are sold in airports and on board commercial aircraft and ships. Duty free shops allow travelers to purchase alcohol, tobacco products, perfumes, and cosmetics among other items at a lower price by waiving off the applicable taxes and duties. Duty free retailing has become quite popular among air travelers as it provides an opportunity to avail international branded goods at discounted prices. The global duty free retailing market is estimated to be valued at US$ 38.95 billion 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:

The key market opportunity for duty free retailing market lies in the increasing international air passenger traffic. According to International Air Transport Association (IATA), the number of global air passengers is expected to witness robust growth in the coming years. IATA estimates that the annual passenger traffic is estimated to double and reach 8.2 billion by 2037. This consistent rise in air travel will fuel sales in airport duty free shops. As duty free shopping has become an integral part of air travel experience for passengers, the high traffic volume is likely to translate into greater sales potential. The growth in international tourism also bodes well for duty free retailers operating in airports and on international routes. Thus, the rapid expansion of global air travel presents a lucrative market opportunity for duty free retailers over the forecast period.

Porter's Analysis

Threat of new entrants: The duty free retailing market requires high capital investments to establish and maintain duty free shops at airports or seaports. Presence of established brands with strong brand equity also poses barrier for new entrants.

Bargaining power of buyers: Buyers have moderate bargaining power due to availability of alternatives and brand options. However, time constraints at airports/seaports limit buyers' ability to compare offerings and negotiate.

Bargaining power of suppliers: Suppliers have moderate bargaining power due to presence of multiple raw material/product suppliers. However, established duty free retailers can choose from a large number of premium/luxury brands.

Threat of new substitutes: Limited threat as duty free shopping offers unique proposition of tax savings. However, online channels are emerging as alternatives.

Competitive rivalry: Intense due to presence of global and regional retailers competing on service, product range, pricing and promotional strategies.

SWOT Analysis

Strength: Wide product assortment, premium brands, favorable locations at airports/seaports, reputed brand image. Weakness: High operating costs, vulnerability to challenges in tourism/travel industry, regulatory restrictions. Opportunity: Emerging regional travel hubs, new seaports, expansion in Asia Pacific. Threats: Economic slowdowns curbing travel, stringent regulations, substitutes like online/domestic shopping.

Key Takeaways

The global duty free retailing market is expected to witness high growth over the forecast period supported by revival in global travel and tourism industry post pandemic. Asia Pacific region holds the major share currently led by travel hubs like Singapore, Thailand etc and is likely to remain the fastest growing region supported by infra developments, rising incomes and expanding regional travel.

Regional analysis focuses on airports/seaports in major economies like China, Japan, South Korea which are witnessing heavy investments in airport expansions and upgradations. Domestic travel is a key driver in Asia Pacific region.

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. These players are focusing on expanding their international footprint, strengthening e-commerce channels and enhancing offerings.