Hainan Free Trade Port is on course to become the largest duty-free market in the world. Between 2020 and 2021, Hainan alone saw an 83% growth in duty-free sales. In 2021, the number of shoppers surged by 73 % year on year to over 10 million, and the number of duty-free purchases increased by 71 % year on year to about 53.5 million.

Hainan’s duty free policy is working. Let’s look at how international businesses entering Hainan duty-free shops can increase their revenue. Also, let’s look at what is in store for foreign tourists.

New Policies Present New Opportunities

• The yearly duty-free shopping quota for Hainan visitors has been raised from RMB 30,000 to RMB 100,000 per person.
• The categories of duty-free items accessible for consumption increased from 38 to 45.
• The RMB 8,000 (US $1,255) duty-free limit for each item has been removed; and the purchase limit for cosmetic products has been increased from 12 to 30 items.

Hainan VS Korean Duty-Free Sales

South Korea’s duty-free market was the world’s largest in 2019, pre-COVID, at RMB 135.8 billion (US $21.3 billion). In 2020, foreigners made up 30% of Korean travel retail clients, with Chinese Daigou traders accounting for 94% of revenues.

`

This changed when COVID-19 travel restrictions were implemented and supply chains became constricted, causing Korea to lose considerable market share. Duty-free sales in Korea fell by 38% between 2019 and 2020. At the same time, Hainan is on course to become the world’s largest duty-free market within the next two years.

Accomplishments & Progress Of Hainan’s Free Trade Port

In 2020, Hainan received 64.6 million tourists and earned RMB 87.3 billion (US $13.7 billion) in tourism revenue as a result of the pandemic. Tourist added value contributed to 7.3% of GDP, making China one of the finest locations for tourism recovery in the world. The tourism industry recovered significantly in the first quarter of 2021, with the number of tourists increasing by 168.1 %. Furthermore, total tourism revenue climbed 293.5% to RMB 42.1 billion (US $6.4 billion).

Development Brings Good News To Hainan

Tourism Resources That Are One-of-a-kind

• China’s only tropical island province
• Largest maritime area

Duty-free Upon Exit 

• One of the few provinces in China where tourists may buy duty-free without having to travel outside
• The world’s largest duty-free shop – prices are 15% to 35% lower than retail pricing.

The Highest Concentration Of Premium Hotels

• 78 world-renowned hotel management companies
• 94 international brand hotels

Visa-free Travel To 59 Countries 

• Citizens of 59 countries can enter Hainan without a visa.
• In 2019, there were around 470,000 visa-free arrivals (+33 % year on year).

Digital Tourism Is Trending In Hainan

Chinese tourists can now enjoy a new type of travel experience thanks to digital tourism.

Decentralization, sharing, and collaboration are online features of digital tourism, which correlate with the experiential attributes, sharing economy, and resource aggregation of Hainan’s tourism business. The Hainan Free Trade Port has offered new chances for the development of tourism in Hainan. Brands should actively participate in the new industrial chain of tourism ecology, which is based on digitization, networking, and intelligence.

Using the internet, digital economy, virtual reality, electronic tourism, and new intelligent features will have a positive impact on the major body of the Hainan cultural tourism market. It is sure to transform purchasing habits in the industry.

The Tourism Industry In Hainan & It’s Implications For Marketers And Brand Owners

Tourism is now the “backbone industry” of Hainan, which is reaching its peak in terms of development.

Hainan’s duty-free consumption has increased after the implementation of the new offshore duty-free policy. This year, offshore duty-free sales surpassed RMB 60 billion (US $9.41 billion).

According to the Hainan Province Department of Tourism, Culture, Radio, Television, and Sports, the province received 81 million domestic and international tourists in 2021, a 25.5% rise over the previous year, gradually returning to the amount in 2019. Furthermore, offshore duty-free sales in Hainan will exceed RMB 50.5 billion in 2021. While achieving extraordinary success, Hainan’s duty-free retail business is expanding in an effort to create a “shopping paradise.”

International brands and Hainan duty-free shops will benefit from each other. More international brands entering Hainan’s duty-free stores will contribute to the policy’s gold content. This may also attract more local and foreign tourists eager to purchase high-value-added duty-free goods, hence increasing Hainan’s single-customer consumption overall.

Luxury Brands Facilitate Marketing And Promotion

According to data, online sales of luxury products across all key categories registered steady growth in 2021.

China is poised to become the world’s largest personal luxury market in the near future. In the current environment, Hainan is expected to cater to luxury goods consumption backflows and become a domestic luxury consumption destination.

Duty-free retailers in Hainan should focus on luxury product subcategories with higher growth potential, such as leatherware, apparel, and fashion, while continuously increasing brand quantity, and strengthening communication via marketing and other promotions.

Optimize Online Platforms And Build A Superior Shopping Experience

The total digitalization of China’s consumption market has already been done at a high level and is improving.

Although physical stores remain the key platforms for branding and sales conversion, many marketing activities and consumer operations have already moved online.

With the implementation of the policy of online additional shopping within 180 days of leaving Hainan Island and the ongoing improvement of Hainan’s general trade and cross-border e-commerce platforms, duty-free retailers should continuously optimize the online shopping system and encourage brand owners to interact with consumers.

They can do this by collaborating with KOLs to introduce social channels, and facilitate VR try-ons, live streaming, and other current popular technologies and channels. This is convenient while providing consumers with a unique online buying experience.

Foster Prosperity Of The Retail Industry

Duty-free shopping is tied to the tourism business, according to leading duty-free retail experiences in other countries and areas. South Korea, for example, has successfully combined duty-free retail with tourist attractions and Korean popular culture to create an amazing trip shopping experience for travelers.

A slew of internet-famous cities is sprouting up in China. As an example, consider Chengdu. It  was recognized as a pearl of fashion growing at the “speed of light” in the New Fashion Capital Index Report. It received the highest scores in five categories: “Fashion consumption strength,” “Fashion business potential,” “Fashion cultural appeal,” “Fashion original talent,” and “Fashion development strength.” Its transition from “pandas’ hometown” to “Chengmsterdam” drew attention both at home and abroad, and it significantly raised the enthusiasm for national tourism

Duty-free retailers and brand owners in Hainan can benefit from experiences in Chengdu and South Korea, as well as collaborate with Hainan’s cultural and tourism industries in digital marketing and promotion. They can explore city music, local foods, urban landscape, and science and technology facilities in Hainan, creating short videos and other online communication materials. This involves the use of images, immersion tactics, and novelty to stimulate dialogue among circles.

In Summary

While catering to the trends of luxury goods consumption upgrading, online consumption, and in-depth integration of shopping, cultural & tourism industry, Hainan’s duty-free retail industry is bound to see prosperous development and become a “golden highlight” of Hainan.