Dissecting Sanya’s retail opportunity

Home to the largest duty-free shop in the world, Hainan Island’s city of Sanya is Disneyland for shopping. Whether you want to write a new year wish on an Armani lantern before lighting it, or immerse yourself in a multi-sensory cosmetics brand journey, the duty-free hotspot takes store experiences to the next level. Despite innovating brick-and-mortar retail, Hainan’s spending slump has recently made headlines. Last year, sales declined 29.3% YoY, with shoppers spending 30.94 billion RMB ($4.24 billion) on duty-free goods, down from 43.76 billion RMB ($5.9 billion) in 2023. That makes 2025 a crucial year for the city, not least because the government intends to turn Hainan into an entirely duty-free island by the end of this year. It would join the likes of Grand Cayman in the Caribbean, and Malaysia’s Labuan, Langkawi, and Pangkor islands. With Lunar New Year approaching — peak retail season — here is a comprehensive update on Sanya for brands to sustain growth and optimize sales. New-gen transformation “Sanya’s retail scene is undergoing a transformation, becoming more diverse, youthful, and fashionable as a tourist destination,” founder of industry newsletter China Retail Watch and journalist, Junjie Wang, tells Jing Daily. Youth-oriented marketing has recently grown in prominence as a component of industry-wide duty-free strategies. Tapestry Group’s luxury house Coach opened its first travel retail multi-floor flagship in China in Sanya earlier this month. It features a café catering to young netizens’ tastes. Following the first China Coach café in Shanghai opening in 2024, the new Sanya location offers a curated menu of classic coffees, artistic desserts, and locally inspired Hainan specialties. Adding a sensory-rich dimension to the shopping journey, it naturally caters to Gen Zers wanting to capture their photogenic lives for social media platforms like Xiaohongshu (RedNote) or Douyin. Coachtopia, a cutesy, circular-focused Coach sub-brand that arrived in 2023, also opened its first China store in Sanya last year. Wang points to the rise of “trendy” shopping malls like Joy City when discussing strategies that cater to future generations of luxury consumers. Opening its doors in Sanya last year, the mall is tilted to Gen Alpha. In November last year, Joy City announced plans to expand in Sanya, acquiring land use rights for 725 million RMB ($98.9 million). The significance of a multi-generational approach for brands operating in the city cannot be overstated. More youth-beloved cult labels are also entering Sanya, such as Le Labo, which debuted last year in Hainan at CDF Sanya International Duty-Free City. Also in niche fragrances, Puig opened four stores — for its Penhaligon’s, L’Artisan Parfumeur, Christian Louboutin, and Byredo labels — at the new Sanya shopping complex Block C in February last year. Experiential competitors Some of Sanya’s experiential pop-ups are otherworldly compared to those rolled out elsewhere. In September last year, for example, L’Occitaine unveiled a Botanical Lab pop-up at the CDF International Duty-Free Complex, where visitors could embark on a sensory journey through four zones blending nature and science, including a 360-degree botanical projection, a garden infused with signature scents, and interactive spaces showcasing natural ingredients and beauty expertise. Despite high-end experiences being paramount in Sanya, Wang says cost-effectiveness is crucial because of the spending decline, particularly as Chinese consumers have become more price-sensitive. “On top of that, for Sanya’s retail developers to regain their former glory, they’ll need to enhance their content and services to offer consumers a retail experience that surpasses what they can find in Shanghai, or Beijing,” she adds. Pop-up success depends, says Wang, on two factors: in-store traffic and average basket size. “To make the most of these investments, brands need to strategically plan their pop-ups to not only attract traffic, but also enhance customer engagement and maximize sales,” she says. “By effectively measuring success against investment costs, brands can determine whether such initiatives are worthwhile under changing market conditions.” Sanya is a prime destination for investing in experiential retail strategies. However, these efforts must be carefully planned and executed to align with the unique market dynamics of 2025. Expanding horizons Ex-Chanel Global E-Business Project Manager, China marketing consultant Yilin Wang highlights how CDF Sanya International Duty-Free City is amplifying its “Trendy Shopping and Fun” marketing strategy to elevate the consumer experience. In December last year, the duty-free store held a “Hot Island Slow Life”-themed Sunset Market that brought together camping, music, and vacationing. “This innovative marketplace diversified the shopping environment and extended the traditional shopping experience into vibrant nightlife, enriching the cultural tapestry of the Haitang District and offering tourists a chance to create treasured memories,” says Wang. “Tourists, often affluent travellers, have unique needs and preferred service methods shaped by seasonal trends, purchasing preferences, and spending capacity. Recognizing that Sanya's duty-free shopping represents a unique opportunity to engage a market eager for exclusive premium goods, she recommends retailers prioritize immersive experiences and personalized services to capture the interest of moneyed travellers. Power in pairs Given rising cost pressures, partnerships can be a lower risk option for brands. This approach can also create more possibilities for experiential innovation. “Dior’s annual collaboration with Sanya Edition hotel consistently attracts a large crowd and has become an effective model of cross-category collaboration between the two brands,” says Wang. “By sharing a common consumer base, they seize this opportunity to provide consumers with an exclusive luxury vacation experience.” On Xiaohongshu, #SanyaEditionDiorPopUp has 4.2 million views — the annual activation has proven to be a reliable way of consistently engaging Chinese influencers on the platform, along with a broader range of luxury consumers beyond those who simply love a photo opportunity. From partnerships with hotels to collabs with malls, there are numerous opportunities for retail expansion in the city. And strong government support augurs well for the future. To entice consumers, the Sanya Municipal Bureau of Commerce spent 74.5 million RMB ($10.1 million) on promotional initiatives from November 2024 through next month, reports Wang. As competition heats up and the government advances its goal to create a duty-free island, it is high-time for brands to enhance their Sanya strategies.

Dissecting Sanya’s retail opportunity

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Published January 15, 2025

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Dissecting Sanya’s retail opportunity