Lagardère Travel Retail has teamed up with Hainan Tourism Investment Development Co Ltd to open the second large-scale downtown duty free shop in Sanya.

Currently, China Duty Free Group (CDFG) operates four stores on the island — Haikou downtown duty free shop, Haikou Meilan Airport duty free shop, Boao downtown duty free shop and the Sanya International Duty Free Shopping Complex.

CDFG will also open a further store at Sanya Phoenix International Airport, along with the Haikou International Duty Free Shopping Complex.

Speaking on day one of the Tax Free World Association China Reborn conference today, Eudes Fabre, CEO North Asia, Lagardère Travel Retail, who confirmed the store will open this month said: “This is definitely an ambitious project in terms of scale and timing.

“We have received tremendous feedback and support from all our brand partners in order to pull this project off with an accelerated timeline. It is definitely exciting.”

Fabre echoed the words of Charles Chen, President, CDFG (who spoke previously) in acknowledging the potential for competition on the island.

“The Hainan cake is large and growing. There is room to expand and create more value for everybody.”

‘PHENOMENAL GROWTH’ IN HAINAN

While acknowledging the phenomenal sales growth on Hainan Island, Fabre emphasises the need for stakeholders to work responsibly together to ensure the growth is sustainable. He remarked: “This is not only achieved by chasing sales volumes, but also by focusing on the quality of the customer experience and building the brand image.

“Ultimately, we need to be generating incremental sales and bringing new customers to brands rather than only cannibalising other channels.”

Looking ahead, there is an excellent opportunity to build on what has already been achieved in Hainan, according to Fabre, who spoke exclusively to TRBusiness following the re-opening of Wuhan Tianhe Airport back in July. “The future of Hainan is ultimately in our hands as an industry.”

He added: “We have to make it work so it is ultimately a success and we get buy-in from customers of course, but also from brand principals. It must ultimately be a business that is valuable in terms of turnover and valuable in terms of our image and clientele building.”

On the overall recovery in China, Fabre reflected on the strong and quick bounce-back of traffic in domestic airports. “We are now in 26 airports across China, so have seen some disparities between regions and our different types of airports.

“Overall though, through the improvement in consumer sentiment, confidence of travellers and stimulus measures from the central government, local governments and even airlines, we have seen a really rapid bounce-back of traffic across our network.”

DOMESTIC TRAFFIC PICK-UP

That China’s domestic travel market continues to pick up spells good news for the economy. While growth has suffered a slowdown in the past year after experiencing consecutive annual GDP surges in the last decade, Chinese President Xi Xinping has suggested the economy can double in size by 2035.

Part of this thrust involves the pursuit of a so-called ‘dual circulation’. This will spur domestic demand on the one hand, while simultaneously encouraging foreign investment and boosting export markets on the other.

There is an argument this will stimulate economic exchanges with foreign countries, but conversely reduce interactions with other global economies as China moves towards increasing self-sufficiency.

In a question from TRBusiness on what this trajectory means for global travel retail, Fabre responded: “It’s no secret that there is a strong willingness of the Chinese authorities to stimulate domestic consumption, including luxury consumption.

“For brands and travel retail players well established in China it is definitely a very positive trend and gives a lot of optimism for the medium-to long-term future.

“At the same time I think there will always be a huge appetite for overseas travel and discovering. For us as the travel retail industry, we should definitely be confident in the rebound of our business and industry.”

Fabre said that the rebound would start in the Asia Pacific region with China — the biggest outbound market — but would then expand to traditional tourist destinations, whether that be in Europe, the Americas and elsewhere slightly later in the future.

“Overall, this internal circulation policy is a strategy to strengthen and develop the Chinese consumer economy and to drive further growth in China. Ultimately for us as an industry, anything that creates a strong Chinese economy and stimulates and encourages strong Chinese consumer spending is an encouraging thing,” he concluded.