The European Travel Retail Confederation (ETRC) says that dramatic falls in customer spending due to reduced tobacco allowances in Australia are alarming.

 

Referring to serious research findings from Swiss-based airport market analyst DKMA – reported in TRBusiness.com (20-02-14) – ETRC Secretary General Keith Spinks agrees that the restrictive inbound allowances imposed by Australia have damaged the overall business.

 

TRBusiness reported DKMA’s findings back in February where the research company found significant shifts in passenger behaviour on international traffic at other airports with travellers destined for Australia.

 

The research company said it found that the reduction in the tobacco allowance reduced the percentage of passengers purchasing tobacco from 37% to 12%. Figures also emerged showing that the average overall duty free spend of these passengers fell by 35%.

 

ETRC Secretary General Keith Spinks.

 

OTHER CATEGORIES DIRECTLY SUFFERING…

Spinks adds that the study also highlights the proven case that these restrictions have driven the reductions in other categories, as the proportion of passengers buying alcohol and fragrances also fell, while the alcohol category was even more heavily impacted.

 

Significantly, Spinks says that this behaviour is consistent with retailer experiences that tobacco is a proven and important footfall driver which brings passengers directly into the shops.

 

He added: “The impact these restrictions on inbound allowances have had at airports with travellers destined for Australia is dramatic. It demonstrates the role that the tobacco product category, although not the leading category in terms of sales, plays in duty free as being a destination category for consumers and helping to drive sales to other categories.”

 

The sheer impact of these inbound allowance restrictions imposed by Australia just demonstrates the urgent need for the industry to push for differentiation of the duty free and travel retail channel in the interest of all product categories, he said.

 

 

BACKGROUND TO THIS ISSUE

It is now a year since the Australian Government introduced restrictions on the inbound allowances of travellers carrying tobacco products. Travellers’ inbound allowances were reduced from 250 to just 50 with the Australian Government claiming at the time that this would generate millions in tax revenues – a much contested claim at the time.

 

It estimated the measure would generate an additional A$127m ($115.9m) in additional tax revenue in 2012-2013 and thereafter increasing to A$172m ($157m) in 2015-2016. This was based on its presumption that the tobacco allowance lost to inbound allowances would somehow be compensated for by additional purchases on the domestic market.

 

However, a study from Deloitte Access Economics found that the gross tax revenues potentially available would be much lower, estimating that these revenues to the Government might be as low as A$23.7m ($21.6m) in 2013, rising to just A$24.8m ($22.6m) in 2017. As the ETRC says, no official figures have been made available as to what the actual result was in terms of tax revenue.

 

 

THE IMPACT ‘CANNOT BE IGNORED’

Spinks says that the industry must recognise the challenges faced by the industry on the issue of inbound allowance restrictions and how Australia’s measures have also demonstrated the concerns on how lost sales are caused outside the country that imposes inbound restrictions – with no redress to the matter whatsoever.

 

He said: “We cannot ignore the impact this restriction has had and must recognise the risk of contagion should similar restrictions emerge elsewhere in the world. We must, as an industry, work together to guard against this spreading to other countries and respond quickly and decisively to any future threats.

 

“We consistently speak about how the duty free industry is a unique retail channel where customer behaviour is entirely different to the domestic market. Achieving recognition of this differentiation by legislators is needed. “

 

The original article in TRBusiness to which Spinks refers can be found at the following link: http://www.trbusiness.com/index.php/component/content/article/45-surveys/14744-dramatic-falls-for-duty-free-tobacco-in-australia.html