The China National Service Corporation for Chinese Personnel Working Abroad (CNSC) has backed Hainan Island and its new offshore duty free policy to become a ‘new engine’ for the development of global travel retail.

In a recent interview with TRBusiness, CNSC revealed it was promoting a new project in Sanya, but provided limited information.

Speaking on day two of the Tax Free World Association China Reborn online event, Evita Qu, Deputy General Manager, CNSC outlined the huge opportunity associated with the project.

She also admitted the retailer is ready to open its new Hainan duty free complex and can do so ‘very quickly’ following the approval of its offshore duty free licence.

Qu was part of a powerful speaker line-up on day two of the event. Day one featured compelling presentations from Charles Chen, President, China Duty Free Group and Eudes Fabre, CEO North Asia, Lagardère Travel Retail.

Entitled Chinese Travel: Today and Tomorrow, the other speakers were Sunil Tuli, President, Asia Pacific Travel Retail Association; Mirko Wang, CEO, Jessica’s Secret; Wang Zhi Yhong, General Manager, CAPSE and Hao Li Ping, Vice General Manager, TravelSky Technology.

Qu said: “The RMB100 billion market size will enable the duty free market prosperity in South Korea to be realised in Hainan. With more structural changes in Hainan, the consumption amount of Hainan duty free luxury goods will represent 50% of those in mainland China in the next five-10 years.”

A NEW ASIAN TOURIST SHOPPING CENTRE

She added: “It can be predicted that with the support of the new policy, Hainan offshore duty free will become a new engine for the development of global travel retail.”

Hainan will quickly become the main destination for Chinese consumers to purchase high-end consumer goods and replace Hong Kong as an Asian tourist shopping centre, according to Qu, who is eagerly anticipating the start of operations in Hainan.

“In the past three months, CNSC has won the tender to operate an offshore duty free store in Sanya. This is the CNSC Sanya International Duty Free Plaza.

“Our team has been working around the clock to push the project to the market with full strength. We are confident it will become a refreshing project for the global travel retail industry.”

She then highlighted three main advantages associated with the project. The first is the ‘extraordinary’ location of the store which is close to the Phoenix Island and Luhuitou Park. It is also connected with the yacht marina, which is well known in Asia. As a result, around five million high-end yacht customers will be fully empowered for duty free consumption.

“Thanks to the mature commercial centre, tourism centre and political centre of Sanya, high-end customer traffic will be naturally formed.

“There are also nearly 100 high-end hotels and residential buildings within five to eight kilometres. The catering and entertainment facilities are complete and Sanya’s largest bar street is just on the other river side of our project.”

The transportation is also extremely convenient, emphasised Qu. “The surrounding shopping and tourism projects are just a 10-minute drive away, while the transportation hubs (train and airport) take 20 minutes to reach by car.”

The second advantage is the positioning of multi-category and characteristic commodities. She explained: “While taking into account fragrance and cosmetics, we also play close attention to the high-value fashion products such as bags, clothing, watches, jewellery and emerging offshore duty free products like digital, wine and liquor.

“Combining the exclusive advantages of Sinopharm Group [of which CNSC is a subsidiary] in the field of healthcare, we will create a new experience of duty free class health. We would like to fully meet all the needs of family-based customers.”

The third advantage of the CNSC Sanya offshore duty free project is the characteristic operation.

‘UNPARALLELED’ LOCATION

Relying on the ‘unparalleled location’ of the store, CNSC is looking to create an exclusive retailtainment experience. This will integrate eating, accommodation, travelling, shopping and entertainment.

“With an interactive operation of downtown duty free, offshore duty fee and port duty free stores, we will create a  closely linked service from outside to inside the island,” Qu remarked.

Following the completion of phase one of the project, phase two will support the expansion of a 200,000sq m duty free commercial complex in Hainan over the next three to five years.

“Leveraging the strength of the whole group, our CNSC team will strive to build CNSC Sanya International Duty Free Plaza into a characteristic project in China and even in the international travel retail industry. Global partners are welcome to visit us.”

Asked by conference moderator and TFWA Managing Director John Rimmer, what the main retail focuses will be in the Sanya offshore duty free complex, Qu said: “We will split our operational categories into three parts. The first is dominant categories such as fragrances and cosmetics which are traditional and very strong categories in the offshore duty free market.

“The second is emerging or faster growing categories since the new policy was introduced. These include original existing categories such as watches and jewellery which have grown very fast in the last four months.

“Thirdly, we will focus on the new added categories which were introduced under the new policy. These are sports, appliances and healthcare products.

“With the support and background of the Sinopharm Group, we would like to create a band new experience or health corner in our Sanya store to meet the demands of offshore travellers.”

BROADER PRODUCT RANGE

On the prospect of offering a broader range of products, in addition to retaining the premium image and luxury feel which the industry has been built on, Qu concluded: “Maybe a lot of people believe healthcare is quite different from luxury goods.

“In our Sanya project, we would like to create an environment for healthcare, not only to sell the products. We will provide a relaxing environment and offer an instrument examining service for our customers, who can try products and learn more about certain items.

“The aim is to offer  a relaxing experience in our healthcare corner. After customers have experienced the personalised service and experience, we would like to enhance their health awareness and develop personalised plans for them.”

As CNSC looks to the future, the Asia Pacific Travel Retail Association (APTRA) is looking ahead to 2021 and beyond. In a pre-recorded video message, Tuli said we must do everything possible to safeguard the regions’s future and get it back to growth. “The big question is how do we do that? The answer is APTRA, which aims to strengthen, nurture and protect our industry,” he remarked.

Advocacy is APTRA’s main priority during the pandemic, emphasised Tuli. “By that, I mean it is how we go about influencing governments and bodies like the International Civil Aviation Organisation (ICAO) to hear us, acknowledge our challenges and create solutions to enable our industry to get back to retailing.

“APTRA knows how advocacy works. There are dozens of examples I could reel off where allowances have been saved. In the case of ICAO right now, our advocacy influence has enabled them to be active supporters of enabling travel retail to get back to business.”

On the support APTRA is receiving, Tuli commented: “Frankly I am disappointed. Ours is a complicated ecosystem. We are wholly reliant on other stakeholders to provide our footfall. Recovery is hard to predict and so much depends on outside forces.

“Of course, health is the number one priority on the planet and APTRA fully supports the global focus on safe travel above all else.”

He added: “Businesses need open borders. This is the pivotal aspect for 2021. It is the difference between it being a make-or-break year. It is the absolute focus of APTRA.”

The latest APTRA campaign launched in September to over 45 governments, which urged a standardised approach to quarantine and testing has generated the best response of all campaigns the association has run. “There is engagement. Ministers are listening. Although we don’t have an instant solution, we must remember the wheels of government move slowly and are often invisible to the outside world.

“The political influencing work we are doing is vital. It is having an effect and will pay off for everyone. It is already getting travel retail noticed, acknowledged and factored into the bigger picture of how governments go about opening borders and finding ways to balance the scales between health, business and jobs.

“APTRA knows we have to fuel change, be an active part of it and to finance it. An inward-looking industry will not fix anything. We are leading from the front and looking beyond the backyard of travel retail.”