JAPAN. From tomorrow Japan will offer consumption tax exemptions for foreign tourists on a vastly increased range of goods in a move that heralds structural change for travel retail in the world’s third-largest economy.
Introduced as part of the package for increasing the domestic consumption tax from 5% to 8% in April this year, the new measure extends exemptions on categories including cosmetics, confectionery, food, liquor, tobacco and medicines to more than 2,400 downtown stores.
Eligibility for refunds of the consumption tax comes down from expenditure of JPY10,000 (US$91.50) to JPY5,000 (US$45.75).
Although the law applies only to the consumption tax at present, major department stores and discount stores in Japan are gearing up to introduce full-fledged duty free services.
As reported, Isetan Mitsukoshi, JATCo and Narita Airport (NAA) will launch a 3,300sq m duty free store in the Isetan Ginza store in Tokyo from Autumn 2015.
The partners formally established the joint venture company Japan Duty Free Fa-So-La Isetan Mitsukoshi
Co. Ltd on 30 September.
“Currently, with the aim of opening in Fall 2015, we are now discussing the merchandise mix, business operation structure and so on among parties interested,” confirmed NAA Senior Manager Retail Strategy Katsuaki Tsukamoto.
Department stores Odakyu, Takashimaya and Tokyu, electronics chain Bic Camera and discounter Don Quijote are among those introducing duty free and other services to tourists, according to Japanese media reports.
For now, airport duty free retailers maintain a general price advantage on imported goods, and the convenience factor will mitigate the impact on categories like confectionery.
Japanese brands will see closer pricing between airport and downtown retailers, however.
The likelihood of much-expanded duty free offerings in the near future is also set to open up far greater competition.
“We have to see what will be going on in downtown sales and airport sales, and consider our tax free and duty free retail strategy,” commented Kumiko Kushida, Manager Duty Free Business Retail Management & Commercial Marketing Department for New Kansai International Airport Corporation (NKIAC).
“We have no plan right now for downtown duty free shops, but we think that we have to consider it after JATCO and Narita Airport will start the business in Tokyo,” Kushida told The Moodie Report.
Kansai Airport is already leading change in the industry, having partnered with Lotte Duty Free to open a duty free store on 4 September – the first entry by a Korean retailer to a Japanese airport.
Suppliers are responding positively to the prospect of more duty free outlets in Japan, amidst government targets of doubling 20 million foreign visitors a year by 2020, and permitting as many as 10,000 tax free stores.
Shigehiro Kondo, President of Choya, commented that having a wider range of stores offering sales free of liquor taxes as well as VAT offers more opportunities for sale of the liqueur specialist’s special duty free items.
“Since I can anticipate the current duty free operators shall launch some downtown shops as well, the entire duty free industry shall be activated and there will be positive effects, in my view,” Kondo said.
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Lotte Duty Free by KAA, the new 330sq m store at Kansai Airport, features Korean brand-name goods from Sulwhasoo and Laneige cosmetics through Korean red ginseng and tobacco |
