BUSINESS Duty-free firms in the limelight as shares soar

BUSINESS

Duty-free firms in the limelight as shares soar

China Daily

07:27, July 10, 2020

A shopper tries on branded glasses at a duty-free shop in Sanya, Hainan province. (Photo: Xinhua)

Share prices of domestic duty-free companies soared on Wednesday after leading retailers like Bailian Group and JD Worldwide announced their interests in entering the sector on the back of favorable policies and China's efforts to boost domestic consumption.

Bailian shares rose by the daily 10-percent limit to 23.97 yuan ($3.41) on the Shanghai bourse, taking the company's market value to 42.7 billion yuan. The Shanghai-based multi-format retailer whose businesses span department stores, shopping centers, outlets, hypermarkets and convenience stores, said on Tuesday that it has applied for a duty-free license. Currently, it operates and sells taxed products.

Shares of Caissa Tourism Group, a travel agency, surged on Wednesday to 18.49 yuan. The company said in a statement on Tuesday that duty-free shops and tourism are its priority businesses in Hainan province.

Shares of Wangfujing Group, a department store retailer, surged by 4.69 percent to 74.12 yuan, up 196 percent on a monthly basis. On Tuesday, it announced plans to set up a duty-free company with registered capital of 500 million yuan after it received a license for the same recently.

According to CITIC Securities, Bailian's plan to enter the duty-free segment is an indication that local retailers and leading enterprises are planning to actively participate in the duty-free sector.

The new license received by Wangfujing Group and the implementation of duty-free policies on the Hainan island have created a healthy, concentrated yet less competitive business environment, which will benefit from the policies to boost domestic consumption, CITIC Securities said in a report.

JD Worldwide, e-commerce giant JD's platform for imported products, is planning to open offline duty-free experience shops in Hainan province, as China looks to transform the province into a high-level free trade port.

Chen Tao, an analyst with internet consultancy Analysys in Beijing, estimated that more cross-border e-commerce sites will launch duty-free stores in the southern island province of Hainan, in a bid to boost their sales and expand business channels, in the wake of the new duty-free policy.

Starting July 1, Hainan has increased its annual tax-free shopping quota from 30,000 yuan to 100,000 yuan per person each year. The 8,000-yuan duty-free limit for a single commodity was abolished, and the categories of duty-free goods have also been expanded from 38 to 45, with some electronic products such as mobile phones and laptops added to the duty-free list.

China's cross-border e-commerce sector has grown exponentially as the country's middle-and high-income shoppers demand increasingly diversified and personalized products and services. Market consultancy iiMedia Research said market size of the country's cross-border online shopping is expected to reach 10.3 trillion yuan this year.

As the COVID-19 pandemic has discouraged outbound tourism, luxury brands are eager to collaborate with domestic duty-free retailing sector to boost consumption within the country.

Gao Ming, senior vice-president and managing director for luxury practice in China at Ruder Finn Group, said travel retail or duty-free businesses are in line with the long-term development of luxury brands worldwide, despite the severe effect on the sector of the pandemic this year.

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