Duty-free market getting a welcome tourism industry boost

The low customer interest in shopping at airports is expected to restrain the growth of the market at these stores, owing to reasons, such as lack of promotion campaigns and high prices of products. Several companies are partnering with duty-free stores to launch their limited or exclusive products, which, in a way, are driving the market growth. By product type, wines and spirits segment is expected to gain a major share during the forecast period

The duty-free and travel retail market size is estimated at $68.84 billion in 2023, which is expected to reach $110.21 billion by 2028, growing at a CAGR of 9.87% during the forecast period (2023-2028).

The rising popularity of the travel and tourism industry is one of the primary factors driving the growth of the duty-free and travel retail market. Duty-free and travel retail provides temporary spaces that offer extra time to end users after security check-in and allow them to get entertained and indulgent with the ambiance and shopping experience for international products.

The increasing focus on digitalizing the retailing process, so that companies can maximize their profits, may boost sales in the market. The growing demand for retail chains that offer luxury and premium brands of various products are augmenting the growth of the duty-free and travel retail market.

The distribution channels offer value to passengers, enhance their experiences while travelling and add value to economic activities.

The low customer interest in shopping at airports is expected to restrain the growth of the market at these stores, owing to reasons, such as lack of promotion campaigns and high prices of products. Several companies are partnering with duty-free stores to launch their limited or exclusive products, which, in a way, are driving the market growth. By product type, wines and spirits segment is expected to gain a major share during the forecast period.

Duty-free and travel retail comprises a category in a growing list of ancillary offerings by airlines. For some low-cost and ultra-low-cost carriers, the growth in the scope and magnitude of ancillary revenues has become the key to their operations, allowing them to offer lower ticket prices and stimulate the overall demand for air travel as a result.

Furthermore, when compared to airport duty-free and travel retail, the duty-free and travel retail sales generated by airlines are substantially smaller, both in magnitude and relative to the financial performance of the respective recipient.

The significant growth in the tourism industry is one of the key factors driving the market growth. In line with this, the increased time spent by passengers at airports due to security concerns and early check-in times is favouring the market growth. Additionally, the increasing preference for luxury and premium products, such as cosmetics, fragrances and alcohol, is acting as another growth-inducing factor.

These apart, the rising air travel and proliferation of new international airports due to the rapidly expanding aviation industry is providing a considerable boost to market growth. Moreover, the introduction of touch screens and interactive retail kiosks, which offers seamless ordering and payment solutions, is providing an impetus to the market growth. The widespread adoption of new marketing strategies by brands, such as launching exclusive and limited products and partnerships with prominent distribution chains to gain a competitive edge, is propelling the market growth. Implementation of various government initiatives promoting international tourism is also positively influencing the market growth. Other factors, including rising expenditure capacities of the consumers, emerging trends of digitalization in retailing processes, the rising consumer inclination for premium wines and spirits, and the introduction of pre-ordering applications, are anticipated to drive the market growth.

Asia-Pacific likely to dominate market: Asia-Pacific occupies more than one-third of the market share. It is expected to grow at a significant rate during the forecast period.

The increasing number of new air routes and the introduction of LCC carriers are among the main factors promoting the development of the Asia-Pacific duty-free and travel retail market. The rise in consumption and purchasing power across India and China may positively impact the market in the region.

The duty-free and travel retail market is highly fragmented. The boom of the travel and tourism industry is encouraging consumers to open new outlets and chains in the duty-free and travel retail market. The increasing focus on offering a diverse and wide range of products may enable the vendors to attract a large number of consumers and gain large market shares.

The adoption of innovative promotional campaigns and attractive price offerings may help the players sustain the competition in the duty-free and travel retail market. Some of the major players are Dubai Duty Free, Lagardre Travel Retail Group, Qatar Duty Free, Flemingo International, Duty Free Americas, Inc., Dufry AG, China Duty Free Group Co. Ltd., King Power International, DFS, Shilla, James Richardson Group, Gebr Heinemann, AER Rianta International, and Lotte.