CARIBBEAN DUTY FREE RETAILING MARKET ANALYSIS

Duty Free and travel retail is a type of retail that caters to overseas travelers. It is a substantial source of revenue with several marketing possibilities. One of the key elements fueling the expansion of the Duty Free and travel retail markets is the growing popularity of the travel and tourist industry. Duty Free and travel retail provides temporary venues that allow end users to be delighted and indulged with the ambiance and experience of shopping for overseas products following the security check-in. Passengers benefit from the distribution channels since they improve their travel experiences and contribute value to economic operations. Due to factors such as the lack of promotion campaigns and high product costs, poor customer interest in shopping at airports is expected to limit the growth of the market.

Caribbean duty free retailing market is expected to surpass US$ 4,017.0 million by the end of 2028 and exhibit a CAGR of 21.7% during the forecast period (2021 to 2028).

Drivers

Caribbean Duty Free retailing market growth is attributed to the rising number of international travelers across several Caribbean countries such as Cuba and Bahamas. For instance, according to The World Bank’s data, around 4.684 million international tourists arrived in Cuba during 2018, as compared to 4.594 million in 2017. Some of the preferred products such as cigars, rum, perfumes, and whiskey by tourists are readily available at discounted prices in retail stores across airports located in the Caribbean region. Thus, an inclination of international tourists towards Duty Free shopping is increasing as additional taxes are incurred on the same products in other countries.

Market Restraints

Caribbean Duty Free retailing market is hampered by various purchasing limitation enforced by the Caribbean airlines that have implemented certain regulations regarding the purchase of tobacco and cigarettes. For instance, Customers in the Bahamas can buy up to 200 cigarettes and 225 gram of tobacco from any duty-free retail establishment, according to Alternative Airlines Ltd. Moreover, customers are reluctant to purchase at Duty Free stores, owing to cabin and luggage baggage restrictions imposed by many air carriers. For instance, Caribbean Airlines has permitted a carrying capacity of 23 Kg *2 luggage bags per passenger along with 1 cabin bag. Carrying an overweight, oversized, or extra luggage bag incurs an additional charge of US$ 150 per bag. This is expected to restrict tourists from purchasing Duty Free products, thereby hampering the market growth to some extent.

Market Opportunities

Shifting lifestyle patterns and the rising popularity of international tourism are expected to offer immense growth opportunities for market players over the forecast period. According to the data of the Caribbean Tourism Organization (CTO), the number of tourist arrivals in the Caribbean region increased by 9.7% from the first half of 2018 to 2019. A surging preference for premium imported products prevailing among the millennial population such as perfumes & jewelry, confectionery and toys among kids, and alcohol and beverages is estimated to fuel the market growth. Moreover, to cater to the surging demand for premium and specialty products, Top Brands International, a distributers and marketer of duty free product revealed its plan to open a 2,000 sq. m. Duty Freestore at Silvio Pettirossi International Airport  Paraguay in February 2020.

Additionally, in October 2019, Habanos, S.A., a Cuban manufacturing company of tobacco launched a jar of Cuban cigars under the brand name, H. Upmann Magnum 56, especially for duty-free sales channel across the Caribbean region. The jar includes 20 units of Magnum 56 cigars (ring gauge 56 x 150 mm length). Such product launches are expected to drive demand for duty-free products.

Figure 1. Caribbean Duty Free Retailing Market – Opportunity Analysis

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Market Trends

Emerging factors that are expected to have a direct impact on market growth include foreign passengers' preference for popular Caribbean island destinations and ports. Duty Free shops can be found at almost each airport in the Caribbean, while specific island locations and ports are known for a high concentration of Duty Free shops, where visitors can find jewelry, watches, perfume, liquor, and other items at a substantial discount.

Figure 2. Caribbean Duty Free Retailing Market Revenue Share (%), By Sales Channel, in 2020

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On the basis of sales channel, air terminals segment dominated the Caribbean duty free retailing market in 2020, accounting for around 49.5% of market revenue share, followed by ports and others, owing to the rising number of duty-free retail shops in the airports. Various mergers & acquisitions by major players in the region also support the market growth. For instance, Nassau Airport Development Company that manages and operates Lynden Pindling International Airport (LPIA), which is a Bahamian company and owned by the Government of The Bahamas and managed by Vantage Airport Group, in January 2018, was seeking a partner to design, build, finance, and manage duty free retail stores at Lynden Pindling International Airport. With the help of this merger, NAD aims to achieve high standard of excellence and customer service in the Lynden Pindling International Airport.

Caribbean Duty Free Retailing Market - Impact of Coronavirus (COVID-19) Pandemic

The COVID-19 has a negative impact on the Caribbean duty free retailing market. The imposition of lockdown and international travel ban have significantly reduced the number of travellers visiting the Caribbean region. A report by IATA (International Air Transport Association) published in November 2020 stated that during the pandemic, Latin America and the Caribbean region witnessed a decline of around 64.0% in the air traffic that resulted in the loss of US$ 5 billion. This decline can be attributed to the reduction in the number of tourists, expenses incurred at travellers’ end to get quarantined, and mandatory testing policy imposed by the statutory governing bodies. Moreover, high risk of virus transmission associated with air transportation and norms prescribed to maintain social distancing have restricted growth of the Caribbean Duty Free retailing market.

Moreover, shifting inclination of government authorities towards health and well-being has reduced the value of funds and policies for the promotion of duty free retailing market. Thus, the lack of moral and financial support by governing authorities has substantially hampered the Caribbean duty free retailing market growth.

Competitive Section

Key players operating in the Caribbean duty free retailing market include Dufry AF, Duty Free Caribbean Holdings, Evelop, Cave Shepherd & Co. Ltd., Pure Grenada, Habanos S.A., and Duty Free Pointe Seraphine.

Few Recent Developments

In December 2018, Dufry AG, a retailer which operates duty-free and duty-paid shops and convenience stores received the contract from Flughafen Zürich AG, the owner and operator of Zurich Airport, for starting five new convenience stores at Zurich Airport (Switzerland). The new stores will offer food & beverages, books, newspapers, magazines, souvenirs, and travel essentials. The stores are expected to help the company expand its footprint at Zurich Airport.