Ten Years Of Tax Exemption In Outlying Islands

From October 1 to October 8, 2020, in just eight days, the amount of tax-free shopping on the outlying islands was 1.041 billion yuan, the number of passengers was 146800, and the number of pieces was 998900, which increased by 148.7%, 43.9% and 97.2% respectively. Who would have expected that the performance of these eight days is higher than the total sales amount of 2011.

Since April 2011, the state officially granted Hainan Island tax-free policy. In the past ten years, the policy has been continuously opened, the amount and number of tax-free shopping on the island have been increasing, and the categories of duty-free goods and the coverage of tourists have also been expanded. In the tenth year, with the help of the new tax-free policy and the international environment, Hainan Island has ushered in a landmark development.

When the development potential of tax-free Hainan Islands is discovered by the capital, different players are also flocking to the track. Enterprises with licenses accelerate their layout, enterprises without licenses "enter the market in a curve", and even Internet enterprises and foreign capital join forces to stir up the tax-free market.

After more and more players crowded into the track, how does the market pattern of Hainan Island change? In addition, due to the deficiencies in price competitiveness, category brands, and the integration of tourism resources in the whole region, how can Hainan develop towards its competitors such as Japan and South Korea in the later stage of the epidemic?

After a ten-year journey, the situation is about to change.

Milestone development in the 10th year

Live up to this autumn, Hainan Island tax-free policy in the mid autumn National Day Holiday Golden Week reaped fruitful results. The sales volume of 1.041 billion yuan in eight days was higher than that of 986 million yuan in 2011.

Looking back on April 2011, when the announcement of the Ministry of Finance on carrying out the pilot tax-free shopping policy on Hainan Islands was issued, no one expected that Hainan Islands would have such a rapid development in the past ten years. According to the historical data disclosed by Haikou customs, the sales of duty-free shopping in Hainan Islands from 2011 to 2019 are 986 million yuan, 2.367 billion yuan, 3.3 billion yuan, 4.33 billion yuan, 5.54 billion yuan, 6.07 billion yuan, 8.02 billion yuan, 10.1 billion yuan and 13.49 billion yuan respectively.

Behind the rapid growth of war achievements is the continuous opening up of policies. The state continues to release favorable tax-free policies for outlying islands. The amount of duty-free shopping has increased from 5000 yuan to 100000 yuan, the categories of duty-free goods have increased from 18 to 45 kinds, and the number of duty-free shops has expanded from 1 to 4, covering all the passengers on the island from leaving by plane to ferry, train and plane.

"At first, there were only two small stores, Dadonghai store and Meilan Airport store. Now there are four stores. Moreover, Sanya duty-free shop in Haitang Bay is rare in the world in terms of volume and scale." Sun Lili, marketing manager of Hainan duty-free products Co., Ltd., is the oldest group of employees of HMV, witnessing the ten-year change of duty-free policy in outlying islands. She recalled to reporters that in the early years, the scale of duty-free goods business in Hainan was quite limited, and the experience of tourists was not good. Therefore, China's Central Committee decided to build a large-scale duty-free city in Haitang Bay.

Sanya International duty-free city was opened in September 2014, with a total construction area of 120000 square meters and a commercial area of 72000 square meters. It is the largest single duty-free shop in the world. Hainan Island has become the most important tax-free sales. According to the daily sales volume of this year, the average daily sales volume of gold stores in Asia has exceeded 70 million yuan since March this year.

2020 is a watershed year for tax-free development of Hainan Islands. The tax-free support policies of the central government and Hainan Province are frequent. Since July, with the express train carrying the construction of Hainan free trade port, the duty-free shopping quota of outlying islands has been adjusted to 100000 yuan, the categories of duty-free goods have been increased to 45 kinds, the postal tax of goods above 8000 yuan has been cancelled, and the number of tax-free goods has been adjusted.

The policy dividend effect is very obvious. From January to June this year, the tax-free sales volume of Hainan Islands was 7.49 billion yuan, but after July, the tax-free sales volume of July September three months has reached 8.61 billion yuan, far ahead of the performance of six months.

Xie Ningling, an analyst at Dongfang securities, believes that the new tax-free policies on outlying islands, such as the cancellation of the postal tax and the relaxation of the number of pieces, will effectively stimulate the consumption of high-priced luxury goods, thus achieving the effect of increasing the unit price per customer and the growth of consumption scale. The same is true of the fact. According to the tax-free data of the National Day holiday, the amount of tax-free shopping on outlying islands was 1.041 billion yuan, the number of passengers was 146800 person times, and the number of pieces was 998900 pieces. The average purchase amount of each passenger was 7084.47 yuan, an increase of 52% compared with last year's National Day holiday, and the average number of purchases was 6.8 pieces, an increase of 25% over the same period of last year.

The new tax-free policy of outlying islands provides an opportunity to promote consumption return. According to ACI world's latest data, by the first half of 2020, the number of airport passengers around the world is down 58.4% compared with the same period last year. International passenger traffic was the hardest hit, down 64.5%. The overall take-off and landing range of the aircraft was - 41.6%. The cliff drop of international passenger flow has a great impact on the tax-free industry. In the first half of 2020, dufry, an international tax-free giant, which always ranks first in global tourism retail revenue, has a 62% year-on-year drop in revenue in the first half of 2020. Rakuten, which ranks second, has a 62% year-on-year decrease in sales in the second quarter. Due to the impact of tax-free performance fatigue, the T1 terminal of Incheon Airport in South Korea has been two times.

However, China immunity group stands out from the crowd in the decline, with a revenue of 19.31 billion yuan in the first half of the year, ranking first in the global list of tourism retailers. The outstanding performance of China immunity is closely related to Hainan Island tax-free market. According to Moodie davitt report, in the first half of this year, tax-free sales in Hainan accounted for 47% of the company. The revenue growth of China immunity in Sanya and Haikou was 12.2% and 136%, respectively, which exceeded the expectation.

The popularity of tax-free not only drives the performance of a company in China, but also fills in the puzzle of Hainan tourism "shopping". "Among the six elements of food, accommodation, travel, shopping, entertainment and tourism, the shortest board in Hainan used to be shopping, which was made up after the duty-free shop opened." Sanya International duty-free city deputy director Jin Juan told reporters that before joining the duty-free shop, she had worked in Sanya hotels for many years. She remembers that before 2014, Haitang Bay was far away from the downtown area of Sanya, and the development situation was not ideal. At that time, only a few hotels were opened, and the occupancy rate was no more than 35%. After the opening of Sanya Bay, the most popular tourist area of Sanya Bay will be built into a tourist attraction. During this year's golden week, all high star hotels in Haitang Bay are hard to find a room, and the price is close to the peak season of Spring Festival.

According to the data released by the Department of culture and tourism of Hainan Province, in July and August, the total number of tourists to Hainan Island increased from - 10.1% to - 1.6%, with a strong growth, and the gap compared with the same period last year is shrinking. The number of tourists from Haikou and Sanya in July and August accounted for 43% of the total number of tourists. The data of the seven days before the National Day holiday further support the heat in Hainan. Hainan Province has received more than 5.13 million tourists. In addition to a slight decrease on October 1, the number of tourists received by Hainan Province from October 2 to 7 increased by 3.1% - 23.4% on a year-on-year basis, and the average room occupancy rate of hotels also increased significantly.

Specifically, Hainan Island carries a lot of high-end passenger demand. Ctrip and other OTA's "11" data report shows that Hainan's high star hotel has been sold out before the holiday, and tourists prefer boutique groups with higher prices. On the car rental platform of Ctrip, Sanya's popularity ranked first in China, with a 66% increase in car daily volume and a 120% increase in turnover over the same period last year. Among them, luxury cars and sports cars are popular, and the order volume is close to 25% of the total order volume of all models, which also ranks first in China. The main part of the outbound tourists in Hainan is the main part of the tax-free passenger flow.

The competition in tax-free market is turbulent

The autumn wind is bleak outside the wall, but the autumn fruits are numerous inside the wall. Hainan Island tax-free hot not only attracted the attention of Chinese and foreign media, but also attracted the attention of capital. Since June 29 this year, the Ministry of finance, the General Administration of customs and the State Administration of Taxation jointly issued the announcement on the tax-free shopping policy for Hainan Island passengers. It was proposed that moderate competition should be encouraged, and all business entities with tax-free product distribution qualification could participate in the duty-free operation of Hainan Island on an equal footing, and who can get the tax-free license for outlying islands has always been a matter of concern. At present, the license holders have been confirmed to be China immunity, Haimian, Hainan tourism investment and duty-free products Co., Ltd. (a subsidiary of Hainan Tourism Investment Development Co., Ltd.) and global consumer boutique Hainan Development Trade Co., Ltd. (a subsidiary of Hainan Development Holding Co., Ltd.). Although the winner of the fifth license has not been clearly announced, the recruitment of Hainan (Sanya) tax-free project released before the tax-free day of China service may have leaked the answer in advance.

However, although the basic competition pattern of Hainan island seems to have been implemented, it does not hinder the enthusiasm of the capital to the tax-free market of Hainan Island. Sorting out the current public information, Zhuhai duty-free group and Wangfujing group, as enterprises with tax-free operation qualification, have set up a new company in Hainan in July, and their business scope shows that they are engaged in the operation of duty-free products on outlying islands approved by the state, while the latter clearly said at the press conference of its 65th anniversary that they will make efforts in the tax-free business form of outlying islands. It should also be noted that Gree real estate launched the acquisition of Zhuhai immunity in May, and it also took the commercial land of Phoenix coast in Sanya a a month ago, which was interpreted by the outside world as a tax-free attack on the outlying islands.

Enterprises without license plates adopt the "curve admission" mode of joint venture. According to the national policy, enterprises without tax-free license can participate in duty-free shops, as long as the tax-free shops are owned by enterprises with tax-free products business qualification, and the proportion of shares is more than 50%. According to the time line, after moving its headquarters to Sanya, Hainan in April this year, Caesar also introduced Wenyuan fund held by the government to jointly increase the capital of Hainan Tongsheng Shijia duty-free Group Co., Ltd.; in September, Hainan Development Holding Co., Ltd. and Fosun Tourism Culture Group signed a strategic cooperation framework in Haikou.

Recently, the international tax-free giants dufry and Ali's "hand in hand" information has also aroused the hearts of people in the tax-free industry. Dufry announced that it would form a Chinese joint venture with Alibaba to develop China's tourism retail business, with Alibaba holding 51% and dufry holding 49%. At the same time, alibaba will also take a strategic stake in dufry, with a target shareholding ratio of up to 9.99% of the share capital after the issuance.

"Dufry has entered the Hainan market through cooperation with other retailers in China. Alibaba's intervention is undoubtedly through the way of capital, from a service provider to a stakeholder directly." Wang Meng, Jessica's Secret CEO, believes that the cooperation between the two sides is a combination of strength and strength. Whether it is from dufry's overall purchasing ability, brand and Alibaba's flow injection, it will have a great impact on the Hainan market. Internet giants enter the tax-free industry, which is undoubtedly the affirmation of the overall market development of the tax-free industry. I believe that other Internet companies will continue to pay attention to the tax-free industry in the future.

"This collaboration sends a clear signal." Yang Jinsong, director of the International Institute of China Tourism Research Institute, believes that the tax-free competition will no longer be limited to traditional tax-free companies and players, and the entry of cross-border competitors will intensify the industry reform. Yang Jinsong thinks that the entrance of Alibaba and other Internet giants may blur the boundary between cross-border e-commerce and tax-free industry, and inject the unique advantages and genes of the Internet industry into the tax-free industry. The utilization of data, digital retail, and innovation of supply chain mode will bring great challenges to the existing tax-free industry, and may also bring more new changes and richer models to the tax-free industry 。

Just as Yang pointed out that new regulatory measures will be needed to adapt to the development of the industry, new regulatory measures will be needed.

"Ali's stake may open a new upsurge of buying and buying Chinese companies, and enrich the internationalization and Sinicization of the existing modern service industry." The vice president of Hainan University will not immediately step into the tax-free process of the Internet market, because the vice president of Hainan University will not immediately step into the tax-free process of the Internet market, because the vice president of Hainan University will not follow the pace of tax-free competition in the Internet market

Another point of concern is that the joint efforts of dufry and Ali also touched the sensitive chord of "whether foreign capital can enter China's tax-free market".

It is reported that Liu Cigui, Secretary of Hainan provincial Party committee, held a video conference with Julian Diaz, CEO of dufry group, after the announcement of the overall plan for the construction of Hainan free trade port. According to media reports, Liu Cigui expressed the hope that dufry group would give full play to its advantages, make good use of the tax-free policy on outlying islands, vigorously lay out high-quality duty-free shops and business networks, and promote the "three synchronization" of Hainan duty-free products with the international market in terms of brand, variety and price, so as to continuously meet the growing consumption demand of the Chinese people. Earlier on April 13, Danzhou successfully signed a contract with dufry group at the centralized commencement and signing ceremony of Hainan free trade port construction project. The two sides have signed a cooperation agreement on building a duty-free shopping center, but there is no official report in the follow-up.

"In the long run, Hainan free trade port is expected to open to foreign investment, but it is still unclear whether it is a free trade port or a duty-free industry." Wang Meng believes that the current Sino foreign cooperation in the tax-free industry is the mode of supply cooperation. He mentioned the case of duty-free cooperation between DFS and Shenzhen. In August, DFS, a world-famous tax-free group, invested 22% of its shares in Shenzhen tax-free e-commerce platform, but it did not become a tax-free shareholder in Shenzhen.

According to the cooperation announcement released by dufry, both sides are learning from each other. Alibaba will introduce its established network in China and its digital technology support, the announcement said. Dufry will contribute to its joint venture's existing tourism retail business in China and will support the partnership through its supply chain and strong operational skills. Julian Diaz also said in an interview that "we hope this cooperation can promote the growth of Chinese customers in Asia and with the world with the support of new digital technology."

Whether or not there is an island tax-free license, Hainan in 2020, the capital market is trying to stir up the spring water of tax-free islands. But for consumers, whose products have more price advantages and more abundant is the key to win. "It is difficult to achieve differentiated competition in tax-free industries." Most tourists think that the price is the most difficult to distinguish from the commodities. Xie Xiangxiang shares this view. He believes that "preferential price and commodity fidelity are the" two treasures "to win. If we must "differentiate", we may be able to make a difference in the luxury, brand and taste of the high-end duty-free market. "

Competition code in post epidemic Era

At present, Hainan Island tax-free is in the hot stage, this fire can continue to burn? How long will it last?

Yang Yang, who has the experience of purchasing on behalf of Macao, told reporters that Hainan Island tax exemption has little impact on her purchasing business. She believes that Macao has unique gambling advantages, which will drive others. Maomao, who has been working hard in Korean duty-free stores for many years, said, "some customers choose Korean duty-free stores because they think that the origin is better."

Therefore, when the epidemic situation is over and outbound tourism is released, Hainan Island will undoubtedly be besieged by tax-free strongmen from the surrounding areas. "In the medium and long term, especially if the Japanese and Korean markets return to normal, Hainan will face significant challenges again," Xie Xiangxiang admitted

Xie Xiangxiang believes that the current factors restricting the development of tax-free Hainan Islands are mainly in the following three aspects: "the price competitiveness of duty-free goods, the types of duty-free products, and the comprehensive attraction of Hainan's whole territory tourism". Hainan's largest Sanya Haitangwan duty-free shop has nearly 300 international famous brands. In contrast, according to he Yanqing, an analyst at CSCI securities, Lotte duty-free stores in South Korea cover 911 brands, and Silla has more than 500 top beauty brands in the world. In addition, it believes that the local brands of duty-free shops in South Korea are also rich and diversified, and the price of duty-free goods is preferential, which is attractive to consumers.

However, according to the reporter's understanding, the advantages of duty-free shops in South Korea are decreasing. According to Mao Mao Mao, in the past, there was a big discount in the price of duty-free shops in South Korea, and they would also give a lot of rebate for purchasing agents. But in recent years, there is almost no rebate for luxury goods, and the price difference between them and domestic duty-free goods is getting smaller and smaller. "Hainan is different. With the amount of 100000 yuan, it's OK to have a little more money and support the country." "In terms of category, we should have all of them." Maomao said that many of his friends have turned to Hainan to buy. The price comparison results on Jessica's Secret app also show that there is not a big difference between Hainan, Hong Kong, Macao, Japan and South Korea duty-free shops for some popular fragrance products.

Xie Xiangxiang pointed out that Hainan Island can expand its growth space from three aspects in the future. The first is to improve the price competitiveness, optimize the supply chain management, reduce operating costs, and form a price depression. Second, increase duty-free categories and set up domestic boutique counters to let Chinese people buy the goods they want to buy. Thirdly, to enhance the tourism attraction of Hainan, transportation service, hotel service, catering service, entertainment service and marine service need to be strengthened systematically. In addition, tourism publicity and promotion should be accurate, and local festival activities should be solid.

Yang Jinsong also believes that the duty-free categories can be further expanded, especially in the domestic high-quality products, which are inclined to domestic electronic brands, and support Huawei, Xiaomi, Dajiang and other domestic products to go global through tax-free channels. At the same time, he pointed out that Hainan duty-free stores should also seize the time to improve service standards and enhance customer stickiness with service, so as to preserve Hainan's competitiveness.

In fact, Hainan Island duty-free upgrading action has been put on the schedule. According to incomplete statistics, since September alone, seven luxury brands, such as Prada and Cartier, have successively entered Hainan Island duty-free shops. The seven measures for promoting consumption in Hainan Province, issued by Hainan Department of Commerce on September 30, also clearly put forward that more high-end and expensive commodity brands will be introduced to enrich business varieties and improve commodity structure. From May 7 to 10, 2021, Hainan will hold the China International Consumer Goods Expo, focusing only on the import of consumer goods, which is known as the ideal gateway for brands to enter the Chinese market.

Haimian and Sanya duty-free city also disclosed to reporters that they will continue to expand the duty-free shopping area and pick-up points, increase duty-free categories and brands, and increase sales staff to jointly make Hainan Island duty-free shopping experience better. Sun Lili disclosed a rather interesting little detail to reporters. Although many companies were hit by the epidemic and laid off workers one after another during the epidemic, the HMV recruited more than 1000 people.

"Compared with the current high-end brands in Hainan, one of the focuses of high-end consumption in the future is high-end brands." Wang Meng believes that with the issuance of more tax-free licenses and the entry of more brands in the future, Hainan still has a large space for development.

He Yanqing is also optimistic about the development of tax-free outlying islands in Hainan. Compared with the four major tax-free areas in the world (Hainan Island, Jeju Island, Okinawa Island and Mazu / Kinmen), Hainan's tax-free policies are very competitive in terms of tax reduction and duty-free commodity categories. They believe that after the detailed rules are adjusted, it is expected that the follow-up release potential is huge, and it is preliminarily estimated that the total tax-free sales of Hainan Islands in the future may exceed 300 billion yuan.