Ed Brennan, chairman and ceo at DFS Group with Shaoqun Chen, chaiman of Shenzhen Duty Free Group

LONDON — Duty-free shopping is the new frontier for luxury brands in mainland China, as Beijing loosened regulations on this lucrative sector by granting a license to Wangfujing Group to enter the competition, and giving Hainan Island duty-free status, amid a slump on international travel due to COVID-19.

DFS Group, an Moët Hennessy Louis Vuitton-owned travel retail pioneer, is the latest global player to weigh in on this fast-growing market. It announced on Thursday that it has taken a 22 percent stake in Shenzhen Duty Free Ecommerce Co., which is majority-owned by Shenzhen Duty Free Group.

The two first began to collaborate in 2018, with DFS supplying merchandise and advising on store upgrades across Shenzhen Duty Free’s network. Since Shenzhen shares a land border with Hong Kong, mainland customers can also preorder online before traveling to Hong Kong, and collect them on return to Shenzhen with little hassle.

Shenzhen Duty Free said the investment will help the company to “further complement and improve its non-tobacco supply chain system, enrich its product categories, reduce procurement costs, improve its operational capabilities, significantly enhance its core competitiveness and brand awareness.”

“Our future is highly digital and very focused on China. Our customers associate shopping at DFS with a truly experiential level of luxury, and we are excited to mirror that experience for them digitally — pre-trip, in-market, in-store and once they return home. The opportunities are endless,” a spokesperson from DFS said.

Shenzhen Duty Free Group is one of the six state-owned enterprises approved by the State Council to operate duty-free products in China. It has been in the business for 40 years and has a retail network in many major cities across the country. The rest of the players in the market include China Duty Free Group, Zhuhai Duty Free Group, China Expatriate Services Ltd., China Hong Kong and China Travel Asset Management Co. Ltd. and Wangfujing Group.

Founded in 1960, DFS Group operates 11 stores in Hong Kong and Macau. But with pro-democratic protests and COVID-19, travel retail has dried up completely in Hong Kong, where DFS is headquartered. Taking up a stake in Shenzhen Duty Free can diversify its revenue stream and safeguard its future in this turbulent time.

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