ANALYSIS: Travel retail beauty’s big Hainan pivot

By Trb Editor |

Estée Lauder at DF x DFS Haikou Mission Hills Duty Free Complex Beauty Hall.

Global travel is finally on a recovery path, but Asia Pacific – a driver of the beauty category – has a twisting road ahead. Luckily, brands have had a bright spot to turn to in China’s offshore duty free island of Hainan.

The impacts of Covid-19 are receding in 2022. However, as probably the worst-hit segment in global retailing, the travel retail industry is seeing a drawn-out recovery.

Its driving force – international travelling shoppers – are not due to reach 2019 levels until at least 2024, according to Airports Council International (ACI).

Asia Pacific is returning to its feet much more slowly than other regions this year. As a result, 1.87 billion less passengers are expected to go through the region’s airports than ACI World’s projected baseline.

Tao Zhang, Managing Director, L’Oréal Travel Retail Asia Pacific.

FROM AIRPORTS TO OFFSHORE

Yet, it might be surprising to learn that beauty brands have coped remarkably well in the circumstances.

Many big international houses reported double-digit growth in travel retail revenue last year, including Coty, The Estée Lauder Companies, L’Oréal and Shiseido.

Focus has shifted away from big airports in Asia Pacific to an island province in China that now punches well above its weight – and has kept travel retail beauty buoyant.

Tao Zhang, Managing Director at L’Oréal Travel Retail Asia Pacific, told TRBusiness: “In 2021, travel retail continued to grow well thanks to booming Hainan. In category terms, premium skincare and fragrances continued to lead the growth.”

Last year, Shiseido’s travel retail division recorded year-on-year growth of +18%, well ahead of Asia Pacific’s 6% increase (excluding China). These powerful strides were mainly thanks to Hainan.

While Coty’s year-on-year travel retail growth was robust – the sector continued to ‘outperform’ in the US and China –  the ‘two-year trends (i.e. compared to 2019) are still negative’, according to Coty CEO Sue Y. Nabi.

On the plus side, this opens the door to push more fragrance growth in the region with launches like Gucci Flora Gorgeous Gardenia and Burberry Hero. Both were seventh-ranked female and male fragrances on Tmall in December 2021.

SMART INVESTMENTS 

Indeed, the pulling power of the Hainan market has been helped enormously by the tripling of the offshore duty free allowance to $14,050 in summer 2020.

At a time when Mainland Chinese were barred from international travel [and still are to a large extent – Ed], Hainan became the go-to destination for beauty shoppers.

It has meant Hainan’s status as a luxury shopping destination has rocketed. In a report on China’s luxury market, global consultancy Bain & Company identified the island province as one of the drivers of future luxury growth in China, with beauty holding a dominant position.

Shiseido Travel Retail expects a full recovery to 2019 levels in 2022. Pictured is NARS’ first-ever 3D virtual animation, Nonstop Nars Virtual World.

Hainan’s duty free stores more than doubled their sales in 2020 and in 2021 they were up again by about 85% to reach RMB 60 billion/US$9.5 billion.

This contributed about 5% to China’s overall luxury goods market growth, according to Bain. The consultancy estimates that personal luxury makes up about 95% of Hainan sales, with luxury beauty accounting for more than 50% of that.

Elodie Brunner, Head of Export, Travel Retail & Middle East, Laboratoire Nuxe.

It is therefore no surprise that beauty and beauty-related companies have dived in. The smart money has been funnelled into popular downtown markets like Macau and Hainan, while optimising domestic consumption in places like South Korea’s Jeju Island and Seoul.

Foreo and sister brand FAQ have been expanding their footprints. Among the company’s retail partners and locations are Hainan Tourism Duty Free Shopping Complex, China Duty Free Group, Times DF x DFS Haikou Mission Hills Duty Free Complex (a partnership between Shenzhen Duty Free and DFS Group), Global Duty Free (GDF) Plaza, and Haikou Meilan Airport, a key air entry point to the island.

Laboratoire Nuxe has also made in-roads into China and Hainan. The brand entered the mainland duty free downtown market in June 2020 when it was first listed by CNSC in its downtown stores in Zhengzhou and Dalian.

Elodie Brunner, Head of Export, Travel Retail & Middle East at Laboratoire Nuxe, said: “We got off to a flying start and are pleased, now, to be working with CDFG, CDF Sunrise, Lagardère and Dufry.”

A listing in Beijing Capital Airport Terminals 2 and 3 is also on the cards, understands TRBusiness.

For the full article, see the TRBusiness May e-zine.

Main image: L’Oréal Travel Retail activation for Valentino at CDF Haitang Bay.

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