The shopping experience for EU tourists in the UK could undergo a major change post-Brexit, as VAT-free shopping may no longer be available to them. However, British tourists have been taking advantage of their ability to shop tax-free within the EU. Interestingly, it’s the Generation Z shoppers who are leading the way in this trend. In February 2023, Gen Z accounted for an impressive 29% of tax-free sales, while other non-EU shoppers only made up 8%. This generation also contributes more than 30% of spending in luxury, department, and watches & jewelry stores.
Among young British luxury tourists, watches & jewelry is a particularly popular category, with an 11% share compared to only 3% for other non-EU shoppers. The trends vary in different markets. For example, UK tourists had the highest average transaction value (ATV) of €2,740 in Portugal in February, surpassing other non-EU shoppers. Despite that, France remains the preferred destination for British tourists, even though their ATV there is below average.
Interestingly, the love for shopping abroad is not exclusive to the UK. Asian tourists, especially Chinese consumers, are making a powerful impact on Europe’s tax-free shopping market. In February, Chinese tourists had an average transaction value of €1,415, while tourists from Taiwan had an impressive €1,368. The US continues to be a significant source country for European shoppers, representing 14.9% of in-store sales. UAE tourists have also shown considerable spending power, with an average transaction value of €1,611, higher than both US and Asian tourists.
These findings support a report by Luxurynsight, which reveals the growing importance of Middle Eastern tourists. However, the anticipated influx of Chinese tourists this summer could potentially change the landscape and diminish the dominance of the US as a source market.
Despite the potential opportunities, the recent UK Budget did not reintroduce a VAT-free shopping scheme for overseas visitors, which has disappointed the industry. Luca Cassina, President of Retail at Planet, expressed his disappointment, emphasizing the missed potential of Chinese tourists’ spending power. Cassina highlighted the benefits of a tax-free shopping scheme, which could generate an additional £350 million for the Treasury annually and provide a significant boost to the struggling UK retail sector. Research conducted by Planet shows that nearly 70% of Chinese consumers would be more likely to visit the UK if a tax-free shopping scheme were available.
As summer approaches and restrictions ease, UK retailers were hoping to benefit from increased international spending. However, without a digital tax-free shopping scheme, they will continue to miss out on the full spending power of both US visitors and high-spending Chinese tourists. The absence of a VAT-free shopping scheme may hinder the UK’s potential to maximize its share of the international tourist market.
Useful links:
1. Planet
2. Luxurynsight
