Airports are one of the prominent places linking travelers internationally and are often equipped with amenities where tourists and travelers can purchase necessary goods. During the recent years, airlines and airports are emphasizing on increasing revenues through the sale of amenities on-board and in airport facilities. Duty-free retailing is regarded as alternative solution to meet passenger’s demands. Duty-free retail is a unique selling channel to cater the international tourists and travelers. This has emerged as one of the important sources of income and marketing opportunity for various businesses around the globe. Products that can be sold duty free varies by jurisdiction and different rules are applied based on excise duty calculations, import allowance restrictions and other factors. The success of the duty-free retail channel is fundamentally attributed to the rise of global tourism and aviation. The businesses in the duty free channel operate in a universal trading environment that meets the needs of travelling buyers, globally.
New airport terminals are designed with consideration for large and vibrant retail spaces as retail contributes substantial share in the non-aeronautical income, thus duty-free retail shops play vital role in modern airport terminals. Self-service solutions such as kiosks have empowered travelers with choices and control over purchases, and thus are driving duty-free retailing worldwide. Convenience provided by self-service solutions is resulting in more satisfied customers, thus impacting their loyalty toward airline services that allows them to purchase items via self-service stations. Furthermore, many manufacturers consider this retailing channel as a cost-effective route to advertise new products to an international audience. Additionally, these passengers prefer buying expensive items such as cosmetics, fragrances, wines and liquor, and fashion accessories available at much lower prices due to exemption of excise duties at airports.
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Despite the presence of factors driving the market, stringent government regulations restrict the ability of manufacturers to access this important market. Moreover, these stringent rules act as hurdles to add new products, particularly for SMEs and local manufacturers, thus restricting customer’s choices. Another important factor hindering the growth of market is linguistic barrier which creates communication gap between the seller and buyers. The duty-free retail market is segmented on the basis of product, location and geography. The market by product is further segmented in to beauty and personal care, wines and spirits, tobacco, eatables, fashion accessories and hard luxury. These duty-free retail shops are mostly found at locations such as airports, railway stations and ports. The duty-free retail market is anticipated to expand significantly in the Asia Pacific region with growing tourism industry in this region. Smart airport initiatives across the globe are also expected to aid the growth of duty-free retailing during the coming years.
Some of the players operating in the duty-free retailing market include DFS Group Limited, Dufry AG, Lotte Co., Ltd., Lagardère, Aer Rianta International (ARI), China Duty Free Group Co., Ltd., Dubai Duty Free, Duty Free Americas, Inc., Gebr. Heinemann SE & Co. KG, King Power International Co., Ltd., HOTEL SHILLA CO., LTD. (The Shilla Duty-free), and JR / GROUP.
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