Confinement has lifted in China, the first good news for the travel-retail industry since the coronavirus pandemic began, although for the moment the country’s denizens still can’t venture too far afield.
The channel, worth around $87 billion overall last year, relies heavily on Asians — and particularly the Chinese — who have been eager to snap up perfume and cosmetics products, comprising the largest category purchased in travel retail. That segment generated about $38 billion in 2019, with 70 percent rung up in Asia, according to Generation Research’s preliminary statistics.
The research firm also noted that in 2019 travel-retail sales of perfumes and cosmetics in Asia posted very strong double-digit gains.
But trade in the channel quickly came to a screeching halt as COVID-19 spread around the globe and most flights were grounded, starting in China. But now, little by little, travel within mainland China is picking up, even as restrictions are maintained elsewhere around the globe.
“Bookings are slowly going up again for domestic China,” confirmed Jérôme Goldberg, global retail and travel-retail division director at ForwardKeys.
“We are seeing some reopenings of shops and businesses, especially in China and Asia, with Chinese consumers [going] to Hainan, Macau and other places,” said Jean-Paul Agon, chairman and chief executive officer of L’Oréal, during a call with financial analysts and journalists in mid-April.
A report from China Luxury Advisors noted 38 percent of people polled said they want to travel more once the COVID-19 outbreak ends, and 43 percent wish to go somewhere to relax. Japan, Oceania, South Korea and Northern Europe were among their most desired international destinations.
According to a survey conducted in March by Ctrip, China’s largest travel booking agency, Thailand, Japan, Singapore, Vietnam and Dubai top the list. Prior to the pandemic, the most visited destinations abroad for Chinese travelers included Japan, South Korea, Malaysia and the U.S., ForwardKeys data showed.
Domestically, the coastal city Sanya, on Hainan Island, is the first desired destination, followed by luxury spending hot spot Chengdu and the mountainous region Guizhou, finance capital Shanghai and Xi’an, the former capital of several ancient Chinese dynasties, according to China Luxury Advisors.
Beijing, Harbin, Jiaozhou and Guangzhou are unlikely to benefit from the Labor Day holiday in China on May 1, as such cities are considered mid- to high-risk areas, since they have seen a rise in imported COVID-19 cases in recent weeks. Anyone who travels to or from such locations is subject to a 14-day mandatory quarantine.
“Chinese consumers’ desire to spend will benefit core domestic retail, rather than travel-retail channels,” said Honor Strachan, retail analyst at GlobalData. “Luxury brands that have a domestic presence via stores and online should see stronger demand return over the course of H2 as consumer confidence builds, while if accessibility to travel to Hong Kong and South Korea improves then these markets will benefit, especially the airport and downtown duty-free formats.”
In response to the situation, DFS said Tuesday that it has become a founding member of the WeChat Retail Growth Plan to utilize WeChat to drive traffic and awareness. DFS customers can now shop and pay for products on WeChat without visiting a brick-and-mortar store, before assigning a designated friend or family member to pick up the products.