The duty-free and travel retail industry is a global sector that, in 2019, generated almost an impressive US$ 100 billion in annual retail sales. This industry revolves around the sale of goods to international travelers, offering
products that are exempt from certain local and national taxes and duties.
However, these goods are only available to travelers who will take them out of the country. Duty-free shops are a key part of this ecosystem, operating within a regulated environment that is governed by national customs authorities.
It’s crucial to differentiate duty-free sales from other forms of trade. Duty-free transactions are not considered cross-border trade, nor are they categorized as duty-not-paid or free-zone sales. Instead, duty-free operations are tightly
regulated by customs laws, ensuring that goods are sold in compliance with specific requirements. Locations where duty-free sales take place include airports, sea ports, ferries, cruise ships, land border shops, and even international railway stations. These shops often require the buyer to prove their international travel plans, ensuring that goods are taken out of the country. Some regions also feature downtown duty-free stores, where a valid proof of travel is required for purchase.
While airports represent the majority of duty-free sales globally, sea ports and cruise ships have become increasingly important players in this market. Duty-free shops at sea ports and onboard vessels in international waters cater to
travelers embarking on international journeys. These retail outlets follow the same regulatory framework as airport duty-free shops, offering a wide range of tax-exempt goods to passengers before departure. Additionally, ships at
sea offer duty-free shopping, with passengers purchasing goods while traveling between countries, further expanding the reach of the industry.
Duty-free retail is also present on ferries operating in international waters, with travelers able to purchase goods duty-free while crossing between regions. Cruise ships, as well, contribute significantly to the sector by offering duty-free shopping to passengers while at sea. Ship chandling, the supply and management of goods for ships, also forms a vital part of this broader duty-free and travel retail market, ensuring that vessels are stocked with necessary products for both operational needs and passenger sales.
Some countries allow travelers to purchase duty-free goods upon arrival,
particularly at destination airports, a practice known as “arrivals duty-free”. This practice is becoming increasingly important in regions such as the Middle East, Latin America, and parts of Europe, generating significant revenue for airports.
The term “travel retail” is used to describe sales in travel environments where goods remain subject to taxes and duties, even though customers are traveling internationally. This distinction is particularly relevant within the
European Union, where duty-free sales for travel within the EU were abolished in 1999.
Duty-free and travel retail are essential to the tourism, aviation, and maritime industries, providing a significant source of non-aeronautical revenue for airports, sea ports, and cruise lines. Retail sales help fund the development of infrastructure and keep airline landing fees competitive. In fact, retail has become the largest contributor to non-aeronautical income in many airports and sea ports worldwide.
To gain a deeper understanding of the duty-free and travel retail industry, the Duty Free World Council offers a Certificate Course in Duty Free and Travel Retail. This course equips students with comprehensive knowledge about the
industry’s history, the key players, and its operational models. It also provides valuable insights into shopper behavior, purchasing drivers, and best practices to optimize sales and enhance the shopping experience in this dynamic and rapidly evolving market.
