Duty Free Retailing is Estimated to Witness High Growth Owing to Advancements in Digital Payments Technology

Duty free retailing refers to retail shops located within airports or ports that are exempt from certain local or national taxes and duties. Duty free shops sell liquor, tobacco products, perfumes, cosmetics and other high-end goods. They provide significant savings to travelers as duties and taxes are a major portion of the price of such premium products. The global duty free retailing market is estimated to be valued at US$ 38.95 Bn in 2024 and is expected to exhibit a CAGR of 8.6% over the forecast period 2023 to 2030.

Key Takeaways
Key players operating in the duty free retailing market are Dufry AG, LOTTE Duty Free Company, DFS Group Limited, Gebr. Heinemann SE Co. KG, The Shilla Duty Free, The King Power International Group, James Richardson Corporation Pty Ltd., Duty Free Americas, Inc., Flemingo International Ltd., Dubai Duty Free, and China Duty Free Group Co., Ltd. These players account for a significant share of the global market.
Key opportunities in the duty free retailing market include expansion into new airport infrastructure projects across emerging economies of Asia Pacific and Middle East regions. Growth of low-cost carriers and international travel is also fueling market opportunities.
Advancements in digital payments technology such as contactless payments, digital wallets and tokenized transactions are allowing seamless shopping experiences for travelers. This is encouraging purchases and boosting sales volumes for duty free retailers.

Market Drivers
A key driver for the duty free retailing market is the continuous growth of international passenger traffic. The number of passengers traveling globally across airports has been rising steadily over the past few years. Higher disposable incomes and greater product affordability is also driving higher ticket sales for duty free retailers. Entry of new private airport operators offering differentiated duty free shopping experiences is another factor fueling market growth.

Current challenges in the duty free retailing market:

The COVID-19 pandemic had a severe impact on the duty free retailing industry due to travel restrictions and border controls imposed worldwide. With international travel coming to a near standstill, sales volumes plummeted rapidly causing heavy losses for retailers. Even as restrictions eased in some regions, recovery has been slow with consumer sentiment and spending on luxury goods remaining subdued. Higher logistics and distribution costs also put pressure on margins. Geopolitical tensions and fluctuations in currency valuations pose additional uncertainties for global retailers to manage.

SWOT Analysis

Strength: Established global brands and extensive store networks across major airports allow leveraging of economies of scale. Weakness: Heavy reliance on international travel flows makes the industry highly vulnerable to external shocks and economic downturns. Opportunity: Growth of cross-border e-commerce and online travel retail channels present new avenues for expansion. Threats: Intensifying competition from domestic duty paid retail markets and expanding multi-brand luxury store networks.

Geographical regions

In terms of value, the Asia Pacific region accounts for the largest share of around 35% in the global duty free retailing market led by China, Japan and Singapore. Europe is the second largest region with major airport retailers concentrated in the UK, Germany, France and Italy.

The Middle East region especially Gulf Cooperation Council countries offer high growth potential for duty free operators. Robust tourism sector growth, state spending on airport infrastructure expansion and rising affluence of domestic consumers are driving strong sales across airports in the UAE, Saudi Arabia and Qatar.