What do Chinese consumers think of Duty Free shops?

What are Chinese consumers attitudes towards Duty Free shops?

Duty Free shops are retail outlet stores that are exempt from paying all local or national taxes. This tax exemption is on the basis that the goods sold in these stores will be sold to travelers who will carry them outside of the country. Inside of duty free shops, products ranging from high-end luxury brands to skin care to specialty food and beverages are sold, at drastically cheaper prices. The products, which would otherwise be highly taxed in stores inside a country’s regular territory, are cheaper because there are no added taxes to them. Duty free shops are generally located inside airports as they target tourists and travelers. Although they are located in airports, not everyone can shop at them.

Using Zhihu, Chinese consumers have expressed that in order to be able to shop inside duty free shops you must:

• Be a traveler. More specifically, a tourist passport holder;
• Have a departing international flight or arriving by an international flight. If you are a passenger on a domestic flight, you cannot enter duty free shops. You have to be going abroad;
• For foreigners, you must register your passport.

You should also:

• Sign up for a duty free membership provided by the operator.

Chinese consumers attitudes towards Duty Free shopping

As China’s economy was developing, the living standard of its individuals improved as well. Chinese people are now choosing to enjoy life more through traveling, choosing to travel as a way to “enrich their knowledge.” When traveling to foreign countries, Chinese tourists purchase a lot of products. This action is the reason behind individuals believing that Chinese tourists are wealthy. However, the majority of them may not be rich and purchases a lot of products because they frequent duty free shops. Chinese consumers specifically look for duty free shops when traveling because they are perceived to provide high-end quality products for cheaper prices than their home countries. The products sold are also perceived to be genuine since countries, including China, strictly control the goods.

 Taking to Zhihu, Chinese consumers have inquired about which duty free shops are the best to shop at and what kind of products are worth buying.

Travel destination such as South Korea, Japan, and Sanya seem to be the three most popular destinations for Chinese tourists and duty free shopping. These are the top destinations because of the quality of the skin care and makeup products and the number of high-end brands provided.

Another reason behind Chinese consumers liking duty free shops concerns the term Daigou. Daigou are known as shoppers who make money by buying products outside of the mainland and then selling them when they return. They mainly specialize in luxury goods but also in everyday items such as groceries, because they cost less and are of higher quality.

Digital platform promotions of Duty Free shops in China

On Weibo, Duty free operators promote their shops and products in numerous ways. Lotte Duty Free and Shilla Duty Free, both Korean duty free shops, have Weibo accounts that have acquired over 8000000 and 5000000 followers, respectively.

Along with the promotion of their products, the accounts also feature services such as giveaways and activities to obtain free products.

These two big Korean duty free shop operators have their websites in Chinese that caters to Chinese tourists.

For Shilla’s website traffic, a percentage of 1.93% comes from social media. Among this 1.93%, Weibo accounts for 1.51%. This means that inside of China, Chinese consumers who visit the website are mainly coming from Weibo.

For Lotte Duty Free Chinese website’s traffic, 1.58% of traffic is drawn from social media. Among this 1.58%, 2.22% is from Weibo.

Thus, Chinese consumers mainly access the site from Weibo, among all the Chinese social media sites.

Online searches for both of these brands of duty free shops in China have displayed constant cycles of highs and lows. Lotte Duty free started to see a decline in searches in early 2018 and continued to decline until early 2019, while Shilla Duty Free witnessed constant growth until early 2018 before seeing a decline. By 2019, it’s searches started to increase again.

The search frequency of Lotte Duty Free Shop on Baidu from 2016 to the present, the highest peak was in at the end of February 2017.

The search frequency of Shilla Duty Free Shop on Baidu from 2016 to the present, the highest peak was at the end of February 2018.

On the official websites, both operators use Korean celebrities to endorse their products, assuming the role of a KOL. They feature the celebrities holding the product, on the promotional materials for the product, and other activities. Lotte Duty Free even utilizes Chinese video platform Youku, to promote their products and to do some KOL marketing. The videos are featured on their website.

Duty Free in China Case Study: China Duty Free Group

China Duty Free Group (CDF) is the only state-owned monopoly company that is authorized by the state-council to carry out duty free business nationwide. They are one of the top three duty free distributors in the world, the largest duty free retailer in China, and have established over 240 duty free shops in the airports of multiple cities. The group has nine duty free types. In the tourism retail business, China Duty Free set-up L’île du Luxe stores that offer top international brands of products such as perfume, cosmetics, clothes, jewelry, and watches, and high-end stores in airports. Currently, there are shops in airports in Guangzhou, Hangzhou, Nanjing, Xiamen, Shenzhen, Dalian, Xi’an, Chengdu, Guiyang, Shenyang, and Changsha, along with shops offshore. The group also established Chinese Specialty shops that are targeted at the market of high-end and high-valuable Chinese specialty souvenirs such as toys, stationery, clothing, bags, food, and household supplies.

In 2016, China Free Group Sanya International Duty Free City won the CTF Travelers Conference “2016 Chinese Tourists Favorite Shopping Shop” Award. Sanya Duty Free City is the world’s largest tax-free commercial complex located in Haitang Bay, Sanya City in Hainan Province. The duty free city has the theme of tax exemption, integrating business, catering, entertainment, and leisure and shopping. It features around 300 internationally renowned brands, five major divisions of national specialty products, Hainan specialty products, outdoor sports, food, customer service, entertainment, and recreational areas. Providing a one-stop shop for customers and enjoyment for the family.

Sanya Duty Free City utilizes Weibo for promotion. The account has attention of 300 and over 270000 followers. KOLs are not frequently used in the promotional materials of the products and mainly include visuals of just the products.  The account also features articles on products and topics related to the shopping experience such as articles about things that customers/fans of the location are most concerned about. These kinds of articles function as a kind of “frequently asked questions” section where the business provides answers to the consumers’ concerns through the articles.

Duty free shopping has become a large part of Chinese tourists’ traveling. With duty free shops, they can obtain goods that are otherwise too expensive in their homeland. These shops offer a way to enjoy luxurious lifestyles within their financial means.

Author: Shyaiah Mitchell

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