CHINA. “I would like to reaffirm our readiness for further mutual cooperation. In one of my previous speeches, I mentioned ‘whoever loses China also loses the future’. On this occasion, I would like to open my arms to all my peer players in the industry to shape a brighter future for China’s duty free market.”
These striking words from China Duty Free Group (CDFG) President Charles Chen came amid a compelling interview with The Moodie Davitt Report Founder and Chairman Martin Moodie, as the Moodie Davitt Virtual Travel Retail Expo Knowledge Hub sessions kicked off today.
Chen said: “Although duty free shopping for international travellers [in China] is not yet restored to the normal state, the duty free market in Hainan has been hitting new highs. Thanks to the new policies [introduced on 1 July], the sales in CDFG stores in Hainan are not only recovering but thriving.”
The wide-ranging interview kicked off with a discussion about the effects of COVID-19 on the travel retail industry, how China in particular is emerging from the crisis and how duty free shopping and consumer behaviour may have changed forever.
Chen said: “In the darkest hours of the crisis, the duty free business of the company almost came to a full stop. The outstanding performance of the Chinese governance, however, has efficiently curbed the spread of the virus, allowing the consumer market and tourism market to quickly regain their strength.”
Asked about what he has learned from the difficult COVID-19 period, Chen summed it up in two words: “Cooperation and innovation.” Discussing cooperation, he praised the brand owners who have “given us tremendous trust and support in commodity supply and promotion”.
Considering innovation, he highlighted advancements in online shopping and its role in reducing “the risk of shopping in stores while meeting shopping demand”. He said: “CDFG’s online shopping has proved a great success, providing not only a powerful support for us to sail through the epidemic crisis but also inspirations and solutions for duty free service innovation in the light of consumer habits with new retail.”
Also on the theme of innovation, Chen acknowledged the rise of livestreaming as an important new element in the CDFG armoury. Livestream platforms, he said, have been launched by Sanya International Duty Free Shopping Complex and CDFG stores in Haikou, Beijing, Shanghai and Guangzhou.
“It has become a powerful tool for marketers during the epidemic, as video clips and livestreaming efficiently reach out to the Millennial generation and the Z generation of consumers,” he said. “We need to go with the tide and seize these new trends on the consumer market. High-quality content production and livestreaming platforms are all the more important to advertise and promote high-quality products and campaigns.”
Chen also pointed out that collaboration with external channel partners has allowed CDFG to generate higher traffic on prominent content platforms, “attracting more consumers through livestreaming and building up customer loyalty”.
He also issued an invitation, which should be noted as an opportunity by brand owners participating in the Virtual Expo this week: “We would greatly appreciate the participation of brand owners in our livestreaming content.”
Turning attention to Hainan, Chen was asked about the impact of the enhanced offshore duty free policies, notably the introduction of new tax-free categories and higher tax-free limits.
Describing new policies as “positive and effective”, he cited statistics released by the Customs Office of Haikou, which showed that a total of RMB5.58 billion (US$0.83 billion) of duty free shopping has been recorded by the Customs from the date of policy implementation on July 1 to August 31, with a year-on-year growth of +221.9%.
Asked about what lies ahead for Hainan and its capital Haikou, Chen spoke of “unlimited development potential”. He said: “We are very much confident of the development of Haikou and planning to open a larger Haikou Duty Free Shopping Complex with more brands and varieties, which, once completed, will take over the place of Sanya International Duty Free Shopping Complex as the world’s biggest free-standing duty free shop and delight consumers with better duty free products and services.”
The rapid ascent of Hainan as a duty free haven is of course attracting the attention of other retailers, but Chen is undaunted by greater competition for CDFG both in this province and on the Chinese mainland. Stating that China is “never dominated by monopoly”, he said competition has helped CDFG to make consistent improvements in procurement, operation, channel expansion, and digital and marketing capacities.
He added: “CDFG has always been actively competing and thus emerged stronger gradually on the international market. New players in the duty free market might bring many new practices and ample space for imagination, but it is for sure that we will bake a bigger cake, rather than competing for a bigger share of the same cake as before.”
He continued: “While leveraging on our advantages as a big player and also an early starter, we are becoming more open and ready to collaborate with duty free operators in China and worldwide to boost the Chinese duty free market with opening up, exchange and cooperation, working on the demand side to encourage consumption, and bringing overseas spending back to China.
“Meanwhile, we will continue on our journey of going global and play a more pivotal role in the global duty free market.”
Chen ended the interview with positive sentiments about the Virtual Expo, where he reaffirmed that there will be a strong participation of CDFG senior management and buying teams to meet with exhibitors and to attend the symposium sessions.
He said: “CDFG believes that more creativity, openness and collaboration is needed in the middle of crisis to share experiences and overcome the difficulties. This is the pioneering Virtual Expo for the industry, we look forward to meeting our friends virtually, and wish the Expo a great success.”
Registered visitors to the Virtual Travel Retail Expo can view the full Charles Chen interview on demand here.
