It is our pleasure to present the second edition of our Hainan Travel Retail Whitepaper, discussing the challenges and opportunitiesfor Hainan as it plays a role in reshaping retail business models in China.
In light of ongoing travel restrictions dueto the COVID-19 pandemic,many Chinese travellers and consumers are focusing onHainan as their attention has shifted to the domestic market. Further, many market players are seeing Hainan as a sustainable travel retail market thanks to its healthy growth.10 offshore duty-free shops in Hainan made outstanding contributions to annual sales exceeding CNY60 billion in 2021, achieving 84%YOY growth. The first China International Consumer Products Expo May 2021 turned out to be the largest high-end consumer produucts exhibitions in the Asia Pacific region. Hainan stands apart from other overseas travel retail destinations because of a series of innovative institutional measures improvingthe business environment. In 2021, more and more brands established their presence inHainan. The ongoing pandemic has raised a greater sense of urgency and enthusiasmfor brands to look for alternative ways to penetrate China’s domestic market,ensure supply chain resilience and improve consumer experience through offerings in Hainan.
With the planned seal-off coming in 2025,the current period is an exciting moment for retail, with brands focusing intensively onthe viability of their future business models, especially the impacts to stakeholders along the supply chain due to the new Sales Tax scheme. Brands are acutely aware of establishing proper Hainan structures and vehicles that will empower their commercial capabilities and allow synergy with the Greater Bay Area and the rest of mainland China.
The pandemic has also made consumers more acutely aware of the need for environmental sustainability and social responsibility, prompting many to increasingly identify with brands that align with their val es in these areas. This has prompted brands to explore multiple channels for theirESG communication with consumers.
Through this paper, KPMG and The MoodieDavitt Report present insights on the Hainan travel retail market,with the goal of enabling duty free operators and brands to seize opportunities in this rapidly evolving landscape.
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