China Duty Free Group signs historic letter of intent to open Beijing downtown duty free store

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China Duty Free Group signs historic letter of intent to open Beijing downtown duty free store

Source: ©The Moodie Report China*

By Martin Moodie

CHINA. In historic news for China’s travel retail industry, China Duty Free Group (CDFG) has signed a ‘letter of content for strategic co-operation’ with Beijing Chaoyang District Government to open a downtown duty free store in Beijing.

The store is likely to be located in Beijing’s Central Business District (CBD). Under the current policy for downtown duty free shopping only foreigners can shop in such stores.

CDFG noted that downtown duty free stores are a significant component of the global travel retail industry and also “an important symbol of an international metropolitan area”. In the past, Beijing did have a downtown duty free store, so the new agreement represents the rebirth of a potentially major channel for China’s travel retail industry.

Additionally, such stores can help lower the ‘threshold’ of China’s luxury market, the company said, thus enhancing the sector’s marketing and competitiveness.

“With the establishment of the downtown tax free and duty free shopping system, a complete industry chain will be formed for Beijing’s travel retail industry to promote the development of high-end retail business towards maturity,” CDFG said.

The Beijing breakthrough is likely to be followed by others. In the stand-out speech of the recent Gate One2One conference in Singapore, CDFG Vice President Charles Chen said: “We are communicating with relevant ministries to prepare for the re-opening of downtown duty free stores in Beijing and Shanghai. We have reached initial strategic agreements with local cities such as Beijing, Shanghai and Xiamen.”

CDFG posted sales of US$660 million in its last financial year, an extraordinary rise of +43.6%, driven by the success of ‘offshore duty free shopping’ (which is distinct from ‘domestic duty free’ in other locations such as Okinawa, Japan and Jeju, South Korea) on Hainan Island and expansion of the company’s airport business.

For the year from 20 April 2011, CDFG posted sales of over RMB1.5 million (US$238 million) at the Sanya store on Hainan Island. Average daily sales reached RMB4.64 million (US$735,000) with an average 3,857 transactions daily. An average 11,956 daily visitors entered the store during the year.

*FOOTNOTE:Charles Chen’s speech and CDFG’s rapid development will be covered extensively in the second edition of our new bi-lingual title, The Moodie Report China e-Zine, out in June. An interview with Mr Lu Lu will appear in a print version of The Moodie Report China to be published at the forthcoming China Travel Retail conference and exhibition to be held in Shanghai on 23-25 July (which The Moodie Report will moderate).

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