The global duty-free and travel retail market is projected to grow at a Culmulative Annual Growth Rate (CAGR) of 7.5 per cent by 2027.
The market, according to experts, was hit hard in 2020 due to the sudden fall in tourism amid the COVID-19 pandemic.
The tourism sector has felt the negative impact of the pandemic on its performance much earlier. Globally, travel restrictions and measures started as early as January of the same year.
Domestic and international tourists limited their travel due to fear of contracting the disease, which reduced the number of domestic and international customers for this retail channel.
The rising popularity of the travel and tourism industry, experts say, is one of the primary factors driving the growth of the duty-free and travel retail market.
Duty-free and travel retail provides temporary spaces that offer extra time to end users after security check-in and allow them to get entertained and indulgent with the ambiance and experience of shopping for international products.
The increasing focus on digitalising the retailing process, so that companies can maximise their profits, may boost sales in the market.
The growing demand for retail chains, experts say, offer luxury and premium brands of various products, which augmenting the growth of the market.
The distribution channels offer value to passengers, enhance their experiences while traveling, add value to economic activities.
The low customer interest in shopping at airports, experts add, is expected to restrain the growth of the market at these stores, owing to reasons, such as lack of promotion campaigns at these stores and high prices of products.
Several companies are partnering duty-free stores to launch their limited or exclusive product, which is driving market growth.
By product type, the wines and spirits segment is expected to gain a major share during the period.
Duty-free shops are retail outlets whose goods are exempted from the payment of certain local or national taxes and duties on the requirement that the goods sold will be sold to travelers who will take them out of the country.
Duty-free and travel retail comprises a category in a growing list of ancillary offerings by airlines. For some low-cost and ultra-low-cost carriers, the growth in the scope and magnitude of ancillary revenues has become key to their operations, allowing them to offer lower ticket prices and stimulate the overall demand for air travel as a result.
Furthermore, when compared to airport duty-free and travel retail, the duty-free and travel retail sales generated by airlines are substantially smaller, both in magnitude and relative to the financial performance of the respective recipient.
Asia-Pacific occupied more than one-third of the market share.
It is expected to grow at a significant rate during the forecast period. The increasing number of new air routes and the introduction of LCC carriers are among the main factors promoting the development of the Asia-Pacific duty-free and travel retail market.
The rise in consumption and purchasing power across China and India may have a positive impact on the market in this region.
In the region, the growing preference for differentiated and value-added products is boosting people’s desire to travel, which in turn, is expected to increase the demand in the duty-free industry.