Chinese Travelers Are Key to ‘Sixth Continent’ of Duty-Free Shoppers

Although mainland Chinese luxury spending declined within China in 2015, Chinese travelers have become the most important members of a “Sixth Continent” of global duty-free luxury shoppers. According to tax refund company Global Blue’s year in review of the global tax-free shopping market, the growth of tax-free spending was heavily dependent on Chinese shopping activity over the past year, and peaked in April at a rate of over 50 percent. October’s global tax-free shopping growth rate was only 8 percent, according to Global Blue, which it says was likely due to “the reaction by Chinese globe shoppers to their unstable economy and currency concerns.” A phrase gaining more attention from brands and marketers in the past few years, the “Sixth Continent” refers to jet-setters from around the world who prefer to do their shopping in airport duty-free shops on their trips. According to Global Blue, the rise of this group is breaking down “notions of stereotyped nationalities” as it merges into one cosmopolitan, digitally savvy, and currency-conscious segment. Facing high tariffs on imported goods on the mainland, Chinese consumers made up a major portion of this group of global shoppers in 2015, especially as Russian consumers stayed home. Chinese tax-free shopping boomed in the first half of 2015, when it reached a peak of 122 percent growth in March, and was followed by 89 percent growth in June. This was due in large part to the declining value of the euro, with the Eurozone seeing a 75 percent surge in Chinese spending in the first half of the year. Meanwhile, the UK has been lagging behind its European neighbors in attracting Chinese shoppers—Chinese tax-free shopping in the UK only saw a 1 percent growth rate for 2015, even as China maintained its spot as the UK’s top group of tax-free shoppers with a 24 percent share of all spending. As concerns about China’s economy set in, Chinese tax-free shopping became more muted in the second half of the year—Global Blue stated that total growth was 16 percent in December, down from 42 percent in November. Nonetheless, some destinations fared much better than others—Chinese shoppers were the top group of tax-free spenders in Italy in December with a growth rate of 61 percent, while Germany saw a 25 percent increase in tax-free transactions from Chinese shoppers during the month. Although the travel-shopping elite members of the “Sixth Continent” share many things in common, including a love for luxury, digital prowess, and jet-set lifestyle, duty-free retailers still tailor service to individual nationalities. Many airport duty-free shops around the globe keep track of flight schedules in order to make sure Mandarin speakers will be on hand when Chinese passengers arrive, and staff are trained to respect cultural differences in service (Chinese consumers prefer testers for perfume), while display cases are also changed throughout the day to suit certain nationalities’ preferences. As the Chinese government sees domestic sales lost to this growing “Sixth Continent” of consumers, it has been increasingly introducing policies to address the issue through the development of domestic duty-free shopping, lower tariffs, and VAT refunds for foreign shoppers. Last week, the Chinese government announced that it will up its duty-free allowance for mainland nationals at China Duty Free Group’s mall in Hainan, which is currently the largest duty-free mall in the world. But as luxury goods at home continue to cost more than those in the duty-free stores, Chinese consumers will likely continue to make a up a vital segment of the Sixth Continent in 2016.

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Chinese Travelers Are Key to ‘Sixth Continent’ of Duty-Free Shoppers