According to a recent analysis conducted by GlobalData, the UK is expected to lose its position as the leading duty-free market in Europe, mainly due to changes in VAT-free shopping regulations implemented by the government. This shift is anticipated to result in a significant decline of 70% in duty-free spending between 2019 and 2025, particularly impacting the fashion and beauty sectors. Interestingly, despite the changes, the new rules still allow for duty-free purchases of “unhealthy” products such as alcohol and tobacco.
Germany and France are predicted to overtake the UK and become the largest duty-free markets in Europe within the next three years. By 2025, it is estimated that the UK’s market share will drop to just 8% from 23.6% in 2019. While the alterations in tax-free shopping regulations have received considerable attention in relation to international shoppers visiting the UK, less focus has been placed on the impact of these changes on UK tourists while traveling.
Traditionally, many UK tourists would purchase duty-free beauty, beach, and accessory products at the airport before embarking on their holidays. However, according to GlobalData’s analysis, the new regulations will lead to a substantial decrease in duty-free spending in the UK, falling from $3.8 billion in 2019 to $1.1 billion in 2025. Previously, cosmetic and toiletry products were the largest category available duty-free, but they will no longer be eligible, along with food, jewelry, watches, electricals, and clothing.
Sofie Willmott, a Retail Analyst at GlobalData, highlights that the changes to duty-free shopping have largely gone unnoticed by many UK consumers who have not traveled by plane or through airports for almost two years. The concept of duty-free prices will no longer apply to most products, and retailers will need to adjust their profit margins to offer more competitive prices at airports. Maintaining the perception that airports offer lower prices compared to the high street will be key.
Willmott suggests that duty-free operators like World Duty Free and Dufry will need to innovate their promotions and pricing strategies to convert former duty-free sales into standard retail sales at British airports. Many airports are designed to guide passengers through retail stores while on their way to the departure lounge, and the removal of duty-free options for products like makeup and perfume may discourage price-conscious consumers and impulse purchases. In this new landscape, retailers will need to adopt strategic approaches to continue attracting customers and generating sales.
Useful links related to the article:
1. GlobalData: GlobalData is a leading data and analytics company that provides insights and intelligence across various industries.
2. World Duty Free: World Duty Free is one of the world’s leading travel retailers, specializing in duty-free shopping at airports and other travel locations.
