Dufry Enters Hainan Duty-Free Hot Spot

Through the collaborations with Alibaba and Hainan Development Holdings (HDH), Dufry widened its Asian footprint adding Hainan Island to its network. The Chinese Government is strongly driving and supporting the evolution of Hainan as travel and shopping destination located in the South China Sea and already famous in China as tourism province offering tropical climate and gorgeous beaches.

By Renzo Radice

The basic requirement to operate duty-free shops in China is the granting of the respective licenses by the Chinese Government. While in the past, licenses were given only to Chinese operators, in recent years and in the context of China’s “opening of its economy” policy, the approach has been changed and the participation of foreign companies through strategic supply and services agreement with a local Chinese partner are now allowed. This is also in the interest of the Chinese customer as competition widens and the access to global brands increases further.

Important collaborations

In this context, the importance of the collaboration with Alibaba, aiming in general at growing travel retail operations with greater emphasis on duty-free in China and accelerating Dufry’s digitalization, and Hainan Development Holdings, to operate the Mova Mall duty-free location, becomes fully evident. By joining forces with the local partners and by participating in this booming duty-free hotspot, Dufry can start building a duty-free presence in Mainland China. As you know, Dufry had so far been present in China with duty-paid operations since 2008 with shops at the Shanghai Hong Qiao and Chengdu Airports, as well as duty-free operations in areas known as Greater China such as Hong Kong and Macau, which benefit from local and specific regulations.

In line with the current legislation, Dufry’s role in the joint-venture is twofold. First, we supply the Mova Mall shop, called Global Duty Free Plaza, with the respective assortment of global brands, which are complemented by local products and brands sourced by HDH. Second, Dufry takes an advisory role to consult the local shop management with respect to shop-design, marketing, promotions etc. Once fully opened, we will also provide our digital services, such as Reserve & Collect, and will cooperate with Alibaba to identify further digital collaboration opportunities such as getting access to Alibaba’s existing customer network of over 800 million people in China or develop new service features for the Chinese customers.

Mova Mall – centrally located in Hainan’s capital Haikou

The Mova Mall and its duty-free operation in the city-center of Hainan’s capital is a major tourism and shopping destination featuring a vast leisure offer of shopping, dining and entertainment facilities, as well as over 2,500 luxury hotel rooms in walking distance. The Mova Mall complex welcomed 22 million visitors in 2019 and visitors from mainland China are allowed to buy duty-free items up to an amount of 100.000 RMB (approx. USD 14,000) per year.

Once the three development phases are completed, the new downtown duty-free shop will span over 38,920 m² across two buildings of the Mova Mall, Aquarius and Capricorn. The first part opened just before the Chinese Spring Festival in 2021. During this initial phase, the temporary product assortment includes an attractive offering covering all core categories such as perfume & cosmetics, food and confectionery, wine & spirits, as well as sunglasses and luxury items from global brands and local premium labels. For the second and third phase for both Aquarius and Capricorn, we engaged with an additional range of top luxury and lifestyle brands allowing the offer to reach over 350 brands across all categories once the store will be fully completed in the second and third quarters 2021.

A highly competitive hot-spot with more to come

Hainan is currently enjoying a high profile with many interested communities such as travel retail operators, brands, media, investors, and most importantly, tourists and customers – everybody wants to be there and benefit one way or the other. Besides Dufry partnering with HDH, there currently are four other major duty-free competitors operating in Hainan. These are China Duty-free Group (CDFG); China National Service Corporation for Chinese personnel working abroad (CNSC); Shenzhen Duty-Free partnering with DFS as well as Hainan Tourism partnering with Lagardère. Today’s duty-free shops in Hainan cover close to 172,000 m² of retail in total and are concentrated in three main locations. The majority of the downtown duty-free shops are in the city of Sanya in the South of the Island, in Haikou the capital in the North as well as in Bo’ao in the Southwest. An additional CDFG-operated duty-free mall is planned to open in 2023 also in Haikou, but the project is still waiting for confirmation.

Leverage learnings from Chinese customers

Besides the pure additional revenue stream that the new shop will generate, the close and first-hand experiences we will be able to make in the Mova Mall operation will allow us to leverage the learnings when seeking other opportunities in China directly as well as across other locations with significant presence of Chinese travelers.