Data analysis and market research consulting company GlobalData has announced that COVID-19 will devastate the global duty free market in 2020 to a tune of US$50 billion, with Asia Pacific to be hit hardest.
Even as the coronavirus pandemic continues to devastate economies across the world, one of the hardest hit sectors is travel. And by extension, travel retail – in fact, data analysis and research consultancy GlobalData has forecasted that COVID-19 will cause global duty free travel spending to plummet a whopping 68.4% versus pre-crisis market size, equivalent to US$50 billion in value. GlobalData predicts that despite lockdown restrictions across the globe being gradually lifted, the global duty free market will be the last retail channel to see a normalisation as consumers avoid non-essential travel abroad.
GlobalData points to Asia Pacific as the region to see the largest impact. “The APAC region will see the largest monetary fallout, losing US$29 billion from its original 2020 forecast, with the world’s largest duty free market, South Korea, suffering significantly – largely due to the reliance on Chinese visitors,” stated Honor Strachan, Principal Analyst at GlobalData.
“Travel routes started to reopen between the two markets in mid-May, but these are extremely limited and Beijing’s current second wave of the virus could lead to a temporary closure of China’s travel corridor with Seoul, hindering its recovery further.”
The research consultancy anticipates that sales is likely to rebound by some 124% in 2021, but consumer spending will only reach two thirds of what was originally forecasted for next year. In addition, passenger numbers will expectedly remain lower than in 2019, with the weak global economy placing downward pressure on what consumers would be willing to spend on discretionary goods. Moreover, GlobalData added, longer processes and checks at airports are likely to limit the time consumers have to spend at browsing in retail; combined with the necessary changes to promotional strategies, product displays and space allocation, are likely to impede operator and brand sales densities.
If you think airports are going to be hit hard, the cruise duty free market is going to be hit even harder, it revealed. “As the largest channel, airports will suffer the greatest revenue losses, but the cruise duty free market will see the steepest percentage decline in 2020 and have the slowest recovery,” said Strachan.
“It will take time to restore consumer confidence in booking cruise holidays, with operators postponing the commencement of schedules due to weak demand and port closures. A vaccine against coronavirus will be essential in returning the cruise market to the high growth it was experiencing before the pandemic,” she added.
In Singapore, GlobalData’s latest numbers and market insight on the 2020 global duty free market is likely to cause some consternation for travel retail operator Lotte Duty Free, which recently took over the liquor and tobacco concessionaire at Changi Airport from previous incumbent DFS. Renovation works for Lotte’s stores at Changi Airport have just begun, now that Singapore has moved into its Phase 2 of its reopening of the economy in the wake of the coronavirus pandemic.