Event description:
Recently, the general office of the State Council issued the opinions on further releasing consumption potential and promoting the sustainable recovery of consumption. Provide guidance from the aspects of enterprise rescue, stable supply and price of consumer goods, innovative consumption formats, quality improvement and upgrading. It is pointed out that we should promote the healthy and sustainable development of consumption platforms, accelerate the cultivation and construction of international consumption center cities, and actively build a number of regional consumption centers. All regions are encouraged to build a number of healthy and green consumption clusters with complete facilities, rich business forms and around the themes of Commerce, culture, tourism and sports. Improve the policy of duty-free shops in the city, and plan to build a number of duty-free shops in the city with Chinese characteristics.
Event comments:
The import tax system and luxury pricing strategy have led to an obvious price difference at home and abroad. Tax exemption can effectively touch the pain points of the industry and become an important channel for the return of overseas consumption and the upgrading of domestic consumption. Tax exemption, as one of the main channels for Chinese people to buy luxury goods during the epidemic, is essentially a form of national financial profit transfer. Through the franchise mode, the tax exempt business is authorized to play an important role in guiding the return of consumption. The duty-free industry is deeply loved by high-end consumers, mainly because it has obvious advantages in the price of goods sold, especially in high-end luxury goods such as boutiques, leather goods, jewelry, watches and so on. At present, the tax preference enjoyed by duty-free goods, including import tariff, value-added tax and consumption tax, can reach 20% – 40% of the cost of goods.
The duty-free industry is closely linked with relevant policies. At present, China’s tax-free industry policy has been continuously liberalized, helping the industry enter a period of rapid growth. Under the background of the global epidemic, China has actively guided the return of overseas high-end consumption by using strict epidemic prevention policies and creating a healthy consumption environment. At present, there are two types of duty-free shops in the city, which mainly serve foreign exchange goods duty-free shops for Chinese tourists (i.e. duty-free shops in the city for returning personnel) and duty-free shops in the city for leaving the country for foreigners. Since the Ministry of finance, the national development and Reform Commission, the Ministry of Commerce and other ministries and commissions proposed “encouraging qualified cities to support the construction of duty-free shops in the city and set up pick-up points for them at the airport” in the implementation opinions on promoting the expansion and quality of consumption and accelerating the formation of a strong Chinese market in 2020, the municipal governments have actively followed up and tried to open duty-free shops in the city to release the consumption potential.
In enriching the business forms of duty-free economy, the duty-free shops in the city are considered to be the next breakthrough in the duty-free market. City duty-free shops, airport duty-free shops and outlying island duty-free shops are three common duty-free businesses in the world. Compared with consumers’ more contact with airport duty-free shops set up in the airport entry-exit hall, the shopping experience, shopping time and shopping methods of duty-free shops in the city are more convenient and flexible. In terms of site selection, the duty-free shops in the city mainly rely on department stores, which are located in the center of the city, with convenient transportation and large flow of people, which can effectively boost the number of buyers and sales. In terms of shopping time, customers in duty-free stores in the city stay longer and will not be limited by flight departure time. Consumers have enough time to select, try and experience, and can play the effect of drainage and marketing at the same time. In terms of shopping experience, duty-free shops in the city are more inclined to travel consumption, with larger space and more types of products to display. In terms of rental cost, the rental cost of airport duty-free shops is relatively higher. Referring to Shanghai International Airport Co.Ltd(600009) for Japan, the deduction rate of Shanghai duty-free stores reaches 40%, and the rental cost of duty-free stores in the city is between 10% – 20%.
Driven by the policy, enterprises in the tax-free industry have gradually formed their own market competitive advantages. At the initial stage of its establishment, China service duty free assumed the important task of the consumption demand of duty-free goods after the entry of service nationals. At present, 12 duty-free stores have been opened in major cities across the country, with more than 150 brands and more than 3700 categories of goods. China Tourism Group Duty Free Corporation Limited(601888) has set up duty-free shops in Beijing, Shanghai, Xiamen, Dalian and Qingdao, becoming the duty-free operator with the largest retail outlets in a single country Caissa Tosun Development Co.Ltd(000796) reached cooperation with China export service, and participated in Tianjin international cruise home port entry duty-free shop, Nanjing duty-free shop and Beijing duty-free shop respectively Wangfujing Group Co.Ltd(600859) has obtained the qualification for the operation of duty-free goods, and the city tax exemption is one of the development directions of the company’s duty-free business. Investment suggestion: at present, the scale of duty-free shops in China is small, which is still in the embryonic stage and has considerable development space. Promoting the development of duty-free operators in the city can attract more overseas tourists to China for consumption. According to foreign experience, duty-free shops in the city are superior to airport duty-free shops in terms of spatial layout, volume and commodity categories. In addition, duty-free shops in the city have greater flexibility in site selection. Because their land scarcity is much lower than that of the airport, their operating costs such as rent are lower. In the next few years, in the tax-free industry, the collective efforts of urban tax exemption and outlying island tax exemption will once again shape the pattern of China’s consumer market. Suggested attention: China Tourism Group Duty Free Corporation Limited(601888) .
Risk warning: macroeconomic fluctuation risk; The risk of residents’ consumption demand falling short of expectations; Risk of tax exemption policy change; exchange-rate risks; The impact of the epidemic on Tourism exceeded the expected risk.
