Russia to capture 20% of Europe’s duty free sales by 2016

By Kevin Rozario |

Russia is going to account for more than 20% of all European duty free and travel retail sales by 2016 while Japan’s and China’s combined share of the Asia Pacific market will remain stable according to a new report about the channel from consumer market research specialist Canadean.

 

The UK company claims that while the top five EU nations in the DF&TR channel – the UK, Spain, France, Germany and Italy – accounted for slightly less than 60% of European sales in 2011 – their combined share will decline by 2016 and be taken by Russia which is anticipated to account for over a fifth of the market.

 

When TRBusiness asked Canadean’s analysts why they believe this European shift will take place, a spokesperson for the company said: “The duty free market in the EU5 countries (UK, Spain, France, Germany and Italy) is relatively mature, as a result of which sales are growing at a relatively slower pace compared to the overall European duty free market. Leading travel retailers such as WH Smith, Gebr Heinemann and Autogrill are witnessing sluggish growth at their EU5 outlets due to the slow travel market in the face of high oil prices, exchange rate fluctuations and the ongoing financial troubles in these countries.

 

“International duty free retailers such as Dufry are witnessing faster sales growth at their Eastern Europe and Asian operations compared to their (Western) European stores, and it is therefore no surprise that they have opted to expand across Eastern Europe, Asia Pacific and South America and limit their exposure to the volatile economic situation in Western Europe.

 

“In contrast, Central and East European markets, especially Russia, Turkey and Nordic countries are performing relatively well, i.e. growing at a faster pace when compared to the EU5. Duty-free retailers in Russia, especially, are witnessing double-digit revenue growth year-on-year.”

 

JAPAN CANCELS OUT CHINA?

As for Asia, Canadean’s assessment is that Japan and China together accounted for 75% of total Asia Pacific DF&TR sales in 2011 and that this share is not going to change even though the company admits that the Chinese market is expected to grow “at a staggering pace”.

 

The spokesperson explains: “We expect duty-free sales in the country to double over the forecast period. However, this growth is being masked when seen in tandem with Japan’s DF&TR market, which is larger than China’s, but is experiencing declines in tourist arrivals. Japanese duty-free sales are expected to be the slowest growing in the Asia Pacific region, hence, the combined share of Japan and China is expected to remain similar in the forecast years.”

 

Canadean’s says that according to preliminary estimates by Japan Tourism Marketing and the Japan National Tourist Organization, tourist arrivals in the country over the past five years have declined by -3.25% annually.

 

ASIAN PROSPECTS STILL STURDY

If the research group is correct and China’s fast growth is going to be cancelled out by Japan’s decline, prospects in the region remain good nonetheless thanks to other developing markets.

 

“Overall, emerging Asian economies are expected to perform strongly in the forecast period across the board, with India, Indonesia, China, and the Philippines experiencing exceptional growth during the forecast period,” adds the Canadean spokesperson. “Moderate growth is expected in Thailand, Malaysia and Singapore.”

 

These markets will ensure Asia Pacific will have the highest growth of any region in the period 2011 to 2016, with a CAGR (compound annual growth rate) of +13.2%, the only region to show double digit growth (see table below).

By graphically comparing the size of each regional market (see chart below) with the five-year CAGR before 2011, and forecast five-year CAGR after 2011, it is also clear that the best-performing growth markets over the full 10-year period are Asia Pacific, followed by Latin America and the Middle East, with Europe and North America seeing little change (the bubble size represents the relative size of the DF&TR market in each region in 2016).

 

Global duty free sales growth shown graphically, 2006–2016

Source: Canadean

 

These findings and others are revealed in an extensive study called Global Duty-Free Retailers: Market Size and Forecast to 2016, which costs US$4,950 for a single use licence and US$14,850 for a global licence (full details here).

 

Canadean says the report provides detailed quantitative analysis of past and future trends with data sets provided for 2006 through to 2016 and actuals for 2011. All initial market sizing and analysis is conducted in local currency in order that local trends are reflected in the data before conversion into other currencies.

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