The significance of establishing stores lies in increasing the display and sale of products such as luxury items, clothing, and electronics, in conjunction with immigration policies to promote Consumer spending by foreign tourists.
According to Zhichun Finance APP, China Merchants released a Research Report stating that the policy for duty-free shops in the city has been relaxed for Chinese citizens, with no limits on shopping amounts for overseas purchases, providing a richer and more comfortable shopping environment, but goods must be picked up overseas. The significance of establishing these stores lies in increasing the display and sale of categories such as luxury goods, apparel, and electronics, and promoting consumer spending among foreign travelers in conjunction with the entry policy. For China Duty Free and Wangfujing Group, increasing city duty-free store projects can enhance sales, broaden channels, and elevate brand influence. However, a single duty-free project requires scaling up and reaching a certain size to achieve profitability, which is also a challenge for new project operations.
Event: In August 2024, the Ministry of Finance, Ministry of Commerce, Ministry of Culture and Tourism, General Administration of Customs, and State Taxation Administration issued a notice on improving city duty-free shop policies. In addition to the original 19 duty-free shops, 8 new duty-free shops are added in Guangzhou, Chengdu, Shenzhen, Tianjin, Wuhan, Xi'an, Changsha, and Fuzhou. Recently, China Duty Free Group and Wangfujing announced their respective bidding results.
The main points of China Merchants Securities are as follows:
China Duty Free has won the bidding for 3 of the 8 new city duty-free shops.
Recently, China Duty Free Group announced that the company has successfully won the bids for city duty-free shop projects in Shenzhen, Guangzhou, and Xi'an. In addition, before the new policy was introduced, China Duty Free had already operated and was in the process of transforming six city duty-free shops located in Peking, Shanghai, Qingdao, Dalian, Xiamen, and Harbin. Currently, China Duty Free Group has city duty-free shops in 9 cities.
Wangfujing Group collaborates with Wushang Group on the city store project in Wuhan.
Wangfujing has recently announced the winning bid for a project in Wuhan city and signed an investment cooperation agreement with Wushang Group to jointly establish Wangfujing Wushang Duty Free Operation Co., Ltd., for the operation of the Wuhan city project, with Wangfujing holding 51% and Wushang Group holding 49%. The project is located at the Wuhan International Plaza Shopping Center in Jianghan District, Wuhan City, Hubei Province. This project is another duty-free project added by Wangfujing after the duty-free shop on the outlying island of Wanling.
The policy focuses on overseas traveler consumption, increasing shopping duration.
The new policy for city stores requires travelers to collect their goods at the airport, prohibiting storage, mailing, and on-entry collection. The emphasis of the policy is on promoting overseas traveler consumption, which is not consistent with the shopping routes of mainland travelers. On December 17, the National Immigration Administration fully relaxed and optimized the transit visa exemption policy, extending the stay time for transit visa-exempt foreigners in the country from the original 72 hours and 144 hours to 240 hours, further providing a rare development opportunity for city stores.
Risk warning: macroeconomic consumer risks; intensified competition risks in the duty-free industry; exchange rate risks.
