CHINA. Chinese travel retail giant China Tourism Group Duty Free – parent company of China Duty Free Group (CDFG) has applauded CDFG’s successful bid for two of the three contracts offered by Shanghai International Airport Co at Shanghai Pudong and Hongqaio international airports.
The group also revealed the contracts would be run on a joint venture basis with the airport company.
As reported, CDFG was awarded concessions 2 and 3 of a three-pronged tender* covering Shanghai Pudong and Hongqaio international airports. Avolta – bidding as Dufry (Shanghai) Commercial Co – was awarded concession 1.
As revealed by The Moodie Davitt Report on 11 December, Avolta and CDFG topped the bidding result. An announcement on 16 December by tenderer Shanghai International Airport Co and tender agent Shanghai Shangzi Construction Engineering Consulting Co formally confirmed the awards.
Joint venture struck
Under the terms of the deal, CDFG will invest RMB102 million (US$14.5 million) to establish a duty-free joint venture with Shanghai Airport.
CDFG will hold 51% of the shares and Shanghai Airport 49%. The joint venture will operate the arrivals and departures duty-free shops at Shanghai Pudong International Airport (Terminal 2 and S2 Satellite Hall international area) and Shanghai Hongqiao International Airport (Terminal 1 international area).
China-chic (国潮) focus
Both parties have agreed to optimise duty-free spaces, while introducing ‘time-honoured’ Chinese brands, cultural and creative products, ‘intangible cultural heritage’ wares, and other distinctive and high-quality items that embody excellent traditional Chinese culture.
They also pledged to increase the sales of Chinese products, launch online pre-order services for airport duty-free shopping, and improve the convenience and service experience for travellers.
Driving sales through special incentives
The two parties will also establish a sales incentive mechanism to enhance the competitiveness of the duty-free business.
Annual assessments will be conducted. For sales exceeding the target per-capita consumption level by a certain percentage, the sales commission for the excess portion will be returned in a tiered reward system.
The airport authority encourages CDFG to introduce competitive new products and those with gross profit margins lower than the highest commission rate for their corresponding categories.
With Shanghai Airport’s approval, the sales revenue of such products will be deducted from the corresponding monthly net sales revenue.
Additionally, sales commission will be calculated separately based on a certain percentage of the gross profit of each individual product and included in the corresponding monthly sales commission.
Noting the impact on the company, China Tourism Group Duty Free said: “After winning the bid for this project and signing the contract, the company’s channel advantages at core domestic airports will be further enhanced, which will help meet the multi-level and diversified shopping needs of inbound and outbound passengers.
“It will also improve the diversified duty-free shopping experience and thus promote the high-quality development of airport duty-free business. If the above projects are successfully implemented, they will have a positive impact on the company’s future operating performance.”
Below are the full details of the tender outcome from our earlier stories.
*Tender structure
As reported, the tender was divided into three parts. Bidders were free to choose which ones to bid on.
- Concession 1: Departures and arrivals duty-free shops in the international areas of Terminal 1 (T1) and Satellite Hall 1 (S1) at Shanghai Pudong International Airport. WINNER: Dufry (Shanghai) Commercial Co
- Concession 2: Departure and arrival duty-free shops in the international areas of Terminal 2 (T2) and Satellite Hall 1 (S2) at Shanghai Pudong International Airport. WINNER: China Duty Free Group Co
- Concession 3: Departure and arrival duty-free shops in the international area of Terminal 1 (T1) at Shanghai Hongqiao International Airport. WINNER: China Duty Free Group Co
According to the tender guidelines, a single bidder could not be awarded both Concession 1 and 2. However, a bidder winning either Concession 1 or Concession 2 remained eligible to also win Concession 3.
Pudong and Hongqaio tender snapshot
Concession 1: Dufry (Shanghai) Commercial Co
Quoted offer: Fixed Fee (Unit Price) ¥3,141/㎡/month. Commission rate for various categories 8%-24%
Starting date and tenure: 1) Term of transfer of overall operating rights: The term of this contract for the transfer of operating rights is 3+5 years, from 1 January 2026 to 31 December 2033.
The delivery time of each site shall be based on the actual delivery time of the tenderer, but the contract termination date is 31 December 2033.
Phased Transfer of Operating Rights Term
Phase 1: The operating rights transfer term is 5 years, from 1 January 2026 to 31 December 2030. If the contract is successfully completed after the fourth year, the contract will be renewed for Phase 2 if the applicant passes the assessment by Party A; otherwise, the contract will terminate.
Phase 2: The operating rights transfer term is 3 years, from 1 January 2031 to 31 December 2033.
Concession 2: China Duty Free Group Co
Quoted Offer: Fixed cost (unit price) ¥3,090/㎡/month. Commission rate for various categories 8%-24%
Starting date and tenure: The term of transfer of operating rights under this contract is 5+3 years, from 1 January 2026 to 31 December 2033.
Phased Transfer of Operating Rights Term
Phase 1: The operating rights transfer term is 5 years from 1 January 2026 to 31 December 2030. If the contract is successfully completed after the fourth year, the contract will be renewed for Phase 2 if the applicant passes the assessment by Party A; otherwise, the contract will terminate.
Phase 2: The operating rights transfer term is 3 years, from 1 January 2031 to 31 December 2033.
Concession 3: China Duty Free Group Co
Quoted offer: Fixed fee (unit price) ¥2,827/㎡/month. Commission rate for various categories 8%-22%.
Starting date and tenure: The term of the transfer of operating rights under this contract is 5+3 years, from 1 January 2026 to 31 December 2033.
Phased Transfer of Operating Rights
Phase 1: The transfer period for the operating rights is 5 years, from 1 January 2026 to 31 December 32030. If the contract is successfully completed after the fourth year, the Phase 2 contract will be renewed if the performance evaluation by Party A is passed; otherwise, the contract will terminate.
Phase 2: The transfer period for the operating rights is 3 years, from 1 January 2031 to 31 December 2033. ✈
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