Duty Free Stores in the Hainan province are enjoying huge popularity and profit as off-shore duty free shops. Sanya and Haiku airport duty-free stores are drawing crowds of cash-rich Chinese who are eager to splurge on branded goods.
Unlike outlets in China international airports which can only offer duty-free goods to Chinese travellers leaving the country, the Hainan stores can sell to local tourists without requiring an outbound ticket.
The tropical island is treated as an off-shore location where Chinese returning to the mainland can buy tax-free branded goods with a wider selection, often available at lower prices.
Launched early last year, this pilot programme exempts Chinese tourists in Hainan from paying import duties which can be as high as 40% for cosmetics.
Branded goods in China are usually more expensive than same products abroad. Coupled with hefty consumption and value-added taxes, the average total levy can add up to about 60%. This jacks up the prices of luxury goods in China and they end up costing about 70% more than similar goods in France and 50% more than those in United States.
“Hopefully, more Chinese people will be able to enjoy better prices and convenience offered by off-shore duty-free stores without having to leave the country,” said Sanya store’s spokesman Ms. Jessica Zhao.
The Sanya store racked up an impressive 800 million yuan (S$159 million) in sales in its first eight months of offering 100-plus brands of luxury items duty-free to Chinese tourists last year.
Experts expect to see more duty-free stores mushrooming across China in the next three to five years.
“The central government had set the trend and the conditions are in place,” said Central University of Finance and Economics’ Professor Li huan, who noted that are applying to become duty-free havens.
China’s southernmost island province hopes to take advantage of its “4S” reputation – sea, sand, sunshine and now, shopping.
Because of the huge popularity of these duty free stores, several travel agencies have included duty-free shopping to their Hainan tour schedules.
“We have added duty-free shopping to all our tour packages to Hainan and will arrange regular shopping-themed tours in the future,” said Zhang Lingjie, Deputy Director of the Domestic Tour department at China International Travel Service (CITS) in Beijing.
Hotels nearby the stores are also benefitting from the influx of guest, noting that the number of bookings have increased dramatically since the opening of the Sanya store.
Airline companies, too have added extra flights to meet the growing demand for Sanya flights.