The recent coronavirus scare has dramatically altered the dynamics of the APAC duty free market, according to research from GlobalData.
GlobalData expects the APAC duty free sales to reach US$35.2bn, which is 19.1% lower than the original (pre-coronavirus) forecast. They forecast that US$5.5bn will be lost from South Korea’s 2020 forecast and US$1.5bn from China over the course of 2020.
While it is difficult to forecast the full impact that coronavirus will have on the APAC duty free market, the research company says that in the short term, sales in China and other markets in the region such as South Korea, Macao, Hong Kong, Thailand, Taiwan and Japan will be significantly hit in Q1 due to the high level of Chinese tourism in these locations.
Key airports in the APAC region, including all domestic and international airports in China, South Korea’s Incheon Airport, Singapore’s Changi Airport, Hong Kong International Airport, Haneda Airport and Narita Airport in Tokyo, are hit. Many downtowns, ports and cross-border duty free stores in the region have temporarily closed.
The crisis will force major duty free operators in the region such as Shilla, Lotte, Shinsegae and China Duty-free Group to re-evaluate strategies and identify other consumer groups and markets to help offset a weakening in revenue. Luxury brands and cosmetics operators in major duty free markets will be the biggest losers given their reliance on high spending Chinese consumers, highlighting how over-exposed the duty free channel is to one key purchaser group.
Authorities have come up with measures to control the losses to retailers. For instance, concessionaires at Singapore Changi Airport will receive rental assistance — 50% rebate on their monthly basic rental charges for six months effective February 1, 2020.