CHINA. China National Service Corporation (CNSC) has hailed Hainan Island as the “new engine” of the Mainland China duty free market and set out its ambitions for its first downtown store in Sanya, which will open soon.
Part of its approach will be to create dedicated zones for healthcare within the new CNSC International Duty Free Plaza, leaning on the expertise of state-backed parent Sinopharm.
Addressing the offshore duty free opportunity during today’s TFWA China Reborn virtual event, CNSC Deputy General Manager Evita Qu said: “No-one can deny that Hainan is the new engine of duty free. China is making great efforts to create a new pattern of economic development in which internal and external growth circles provoke each other.”
Here, the expansion of Hainan Island and new entrants to Sanya and Haikou, including CNSC, will play their part in driving internal consumption, she said, with “the era of exclusive operation” coming to an end.
“Hainan will quickly become the destination for Chinese consumers to purchase high-end goods, replacing Hong Kong as an Asian tourist shopping centre and replacing European and American markets to a certain extent.
“With the new policy [and expanded shopping allowances now in place -Ed], Hainan Island will become a growth engine for global travel retail.”
Focusing on the CNSC International Duty Free Plaza, Ms Qu said the new store is ready to open, but awaits final approval from government for its licence. Once that occurs, “we can open quickly,” she said. “We are confident that that will become a refreshing product for the global travel retail industry.”
The store benefits from three main advantages, she said. A prime location is one, close to the political, commercial and tourism heart of Sanya, strong transport links, as well as a marina that should attract 5 million high-end visitors in the next three years. Almost 100 high-end hotels and residential buildings are also nearby, as are attractive dining facilities.
Another positive, said Ms Qu, is the multi-category nature of the store. “While taking into account the traditionally dominant fragrances & cosmetics items, we also pay close attention to high-value fashion products such as bags, clothing, watches & jewellery. We also carry emerging offshore duty free products such as wines & spirits.
“Using the advantage of our parent Sinopharm Group in the field of healthcare, we will create a brand new experience of duty free plus health. We will also include sports appliances, which are becoming popular. We want to fully meet the needs of all family-based customers. There is a big opportunity in family and health purchases, a trend heightened by the pandemic.”
Addressing the inclusion of healthcare within an otherwise luxury-led offer in a Q&A with TFWA Managing Director John Rimmer, Ms Qu said that healthcare would be presented in a premium way. “We will create an environment not only to sell the products but also services and ways for our customers to try out and learn more about the products. We want them to have a relaxing, personalised experience, in which they can enhance their health awareness. We will create healthcare areas dedicated to this.”
CNSC aims to deliver “an exclusive retail-tainment experience, integrating meeting, residing, travelling, shopping, health and entertainment. With the interactive operation of downtown duty free, offshore duty free and port duty free, we can realise a full service from outside to inside the island.”
After Phase One is completed, in Phase Two CNSC will support expansion of 200,000sq m of duty free space in commercial projects in Hainan over the next three to five years.
“Our team will strive to create CNSC International Duty Free Plaza as a characteristic product in China and even in international travel retail. We welcome global partners to join us,” she said.
The Hainan project accelerates CNSC’s impressive recent momentum. The company has been awarded three departures duty free contracts at leading Chinese airports – Nanchang Changbei International, Quanzhou Jinjiang International and Nanjing Lukou International (where, as reported earlier this month, CNSC was named highest bidder).
The retailer has also secured three land port departure store contracts, at Longzhou Shuikou port (on the border with Vietnam), Pingxiang Friendship Pass (one of the most famous passes in China and a key point of political, economical and cultural communication between Vietnam and China), and Jian port, respectively.
In September, CNSC also celebrated the Grand Opening of a new-look downtown duty free store in Hangzhou, the capital of China’s Zhejiang province.
Commenting on the wider market, Ms Qu said: “The Chinese have now transferred their spending in duty free to the local market because they cannot go abroad. The high-end market represented by travel retail and luxury goods is recovering strongly. Sales of top luxury brands have increased against the trend during this year.
“As an important participant in China’s travel retail industry, and while we are concerned about the impact of the pandemic, the crowded stores we see at CNSC locations give us great confidence. The number of shoppers remains strong and stable and 75% of consumers have even increased their shopping budget in duty free.
“In addition, the proportion of young consumers aged 18 to 35 has now exceeded 50%, which will help make the market more dynamic.
“A new change in global travel retail has come. The Chinese market is becoming the new focus of global travel retail.”
Other speakers today included Asia Pacific Travel Retail Association President Sunil Tuli, Jessica’s Secret CEO Mirko Wang plus representatives from two leading Chinese aviation data providers: CAPSE GM Wang Zhi Yong and Vice General Manager of TravelSky Technology Hao Li Ping.
We will bring you more news from the TFWA China Reborn event soon.
Hainan Island: Travel retail’s global hotspot
The Moodie Davitt Report will publish a Hainan Island Special Report with the China edition of The Magazine in February 2021. Written by Martin Moodie and Dermot Davitt, it will explore how the offshore duty free business in China has become critical to the world’s leading brands across many categories.
The report will feature:
- Comment & analysis on the seismic impact of the new offshore duty free policy in Hainan since 1 July
- The potential of new offshore duty free allowances across categories from beauty to fashion and watches and from wines & spirits to consumer electronics
- Major interviews with and profiles of China Duty Free Group, CNSC, Hailvtou Sanya Downtown, Hainan Provincial Bureau of International Economic Development and others, with a special focus on the ambitious Hainan Free Trade Port project
- Beyond Hainan, we examine the rebound in the China domestic market, assess prospects for Chinese airports and hopes for an eventual return to international travel. With input from leading travel retailers in the Mainland, Macau and Hong Kong markets
- The ecommerce drive: Assessing the potential of the partnership between travel retail’s long-time market leader Dufry and the digital powerhouse Alibaba; plus digital strategies at CDFG and other major players
- With contributions from our content partner Globuy, iClick, Jessica’s Secret and DutyFree Expert on trends among Chinese consumers and the duty free market
Contact Irene@MoodieDavittReport.com to partner with The Moodie Davitt Report for this special edition.
