CDFG President, Charles Chen had an important message to share with brands on the first morning of the 2019 TFWA China’s Century Conference – which is taking place in Sanya, Hainan – when he warned them about the potential damage, which could be caused by the Daigou trade to the luxury goods industry.

 

The Chinese Government has launched various initiatives to crack down on this unofficial sales channel, such as its new ecommerce law, which was implemented on 1 January this year. Thankfully for Korean DF&TR operators, this has appeared to have little impact, in terms of sales, so far.

 

Chen was keen to communicate his concerns about the Daigou business, directly with the brands in the audience this morning: “These traders just place all your products [in a pile] on the floor,” he said, suggesting that this was ‘not good’ for any company’s image, but especially not for luxury goods.

 

“Look at the way [your products] can be beautifully presented in our Haitang Bay [offshore duty free] store, for example.”

 

CDFG’S HAITANG BAY STORE REGISTERS $1.1BN IN 2018

Chen confirmed to TRBusiness that Hainan’s duty free sales rose to RMB10bn ($1.5bn) in 2018 of which CDFG’s Haitang Bay, Sanya store contributed $1.1.bn.

 

As reported, during this year’s Spring Festival Golden Week holiday period, Hainan’s duty free sales tipped RMB100m ($14.7m) on two consecutive days (8-9 February), with income at shops in Haikou and Sanya rising by 26.3% to RMB558.27m ($83m).

 

He said the future potential for tourism and the duty free & travel retail market in Hainan, is ‘huge’ and it was now the job of CDFG and its partners to drive penetration, conversion and ATV rates to really leverage the opportunity to the full.

 

Interestingly, when TFWA’s John Rimmer asked Chen if he was concerned about the apparent slowdown in spend by Chinese travellers, Chen was reluctant to agree with him that this was the case.

 

IMPRESSIVE DOUBLE-DIGIT SALES GROWTH IN SOME CATEGORIES

“Actually, if you talk to many of the brands here, you will discover that they are actually very happy with their sales [with CDFG at least].”

 

After his presentation, Chen told TRBusiness that sales in some categories, particularly of some popular colour cosmetics products, had jumped 60-70% in the last couple of years, particularly at the company’s airport stores.

 

Earlier on in his presentation, Chen shared some interesting data on the changing spending habits of Chinese outbound travellers, insisting that the amount of money they spent on shopping dropped in 2018, but their spend on ‘cultural and recreational activites’ rose.

 

The share of their total travel expenditure attributed to shopping decreased from 34% in 2017 to just 16% in 2018. However, despite this trend, duty free sales generated by Chinese outbound travellers continued to grow.

 

In addition he revealed that online sales of luxury goods in China had risen by 37% to RMB 36bn in 2018.

 

More live reportage from Sanya to follow.