The Americas duty free and travel retail market will outpace pre-recession levels and grow at an annual CAGR (compound annual growth rate) of +5.1% to $7.4bn according to UK-based retail analyst Verdict. The US will also be boosted by more lenient rules on the duty free allowance.

That 2020 figure is well below the 2015 provisional figure for the Americas from specialist Swedish DF&TR analyst, Generation Research, which stood at $11.3bn (down -3.8%).

The large discrepancy appears to lie in the definition of the Americas. While Generation includes the entire region including sizeable downtown duty free markets in the Caribbean, Verdict Retail’s report Duty Free Retailing in the Americas 2015-2020 applies only to what the UK analyst regards as the top nine Americas DF&TR markets: the US, Brazil, Canada, Mexico, Chile, Peru, Argentina, Colombia, and Venezuela.

Clarifying its numbers to TRBusiness, Maureen Hinton, Global Research Director at Verdict Retail, says: “The 2020 value of $7.4bn does not include the Caribbean – though it would include sales on US cruise ships in the region.”

CLEARER AGREEMENT ON US MARKET

The two research group are more in step on the value of the biggest DF&TR market in the region: the US. Verdict values it at $3.9bn in 2015 while the 2014 figure from Generation was $3.75bn.

Verdict’s new report says that the US market will expand by $1.1bn to hit $5bn by 2020 (at a CAGR of +5%). That will maintain the US share of the Americas [as defined by Verdict] at about 68%, helped by rising numbers of international travellers, especially from China. A surge in US outbound travel will also mean that citizens will be making more use of their $800 duty exemptions.

The Trade Facilitation and Enforcement Act of 2015 has also given US citizens more duty free options. Hinton tells TRBusiness: “Before this latest bill, tourists returning from international trips could carry back up to $800 of merchandise duty free [this was raised in 2012 from $200].

“But if they shipped those exact same goods, only the first $200 was duty free. This latest act now means they can buy from anywhere when travelling and ship it back, up to the value of $800. But also they could be at home in the US and buy from abroad up to $800 and not have to pay duty on it (so buying online for instance). This raises the value of all duty free sales, but not necessarily all via travellers.”

Hinton adds: “Duty free retailing has been under-exploited by US airports until recently, but having seen its success in other regions, US airports operators have realised the revenue benefits of having attractive retail facilities for travellers.

Airports such as La Guardia, Pittsburgh International, Dallas, Denver and Los Angeles have invested more in retail, allowing big European DF&TR players such as Dufry, Lagardère Travel Retail, and Gebr. Heinemann to look at expansion in the region.

BRAZIL TO REACH $1BN

Verdict suggests that Brazil, the second largest Americas market, trails the US by some way with sales of $0.8bn in 2015. The analyst maintains that despite the country’s serious economic troubles it is also set to grow by a CAGR of +5% to reach $1bn by 2020.

A benefit should be a greater number of international travellers in the aftermath of the Rio 2016 Olympics – though this is not guaranteed.

Verdict believes that currency devaluation and political and economic instability will have only a short-term effect on Latin American markets, whereas untapped tourism potential, growing arrivals duty free, and sporting events in these countries will keep the long-term potential intact.

The report also states that, of the nine markets analysed, Canada will grow fastest with a CAGR of +7.6% during the forecast period, reaching $554m by 2020. “A weak Canadian dollar and government tourism campaigns will attract American visitors, driving duty free sales in the country,” Hinton claims.