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October update: Tax Free Shopping spending in Europe stabilises

For the first time in 2016, Global Blue’s Tax Free Shopping (TFS) sales performance is stable in Europe, at 0% for October year-on-year (YoY), a marked improvement on September’s -6% YoY continued single-digit regional decline.

Global Blue has been monitoring TFS sales declines in Europe between -2 to -22% YoY since January, so October’s halt is a sign that better macroeconomic conditions, plus a lower base as the benchmark comparison to 2015, is improving the region’s luxury spending performance. This is due to a significant improvement on the number of tax-free transactions this month (-5% vs -10% in September).

Global Blue’s TFS performance this month is in line with recent data released by luxury consultant Bain & Company, which reported luxury sales are expected to flatline this year, with an overall global dip of -1% compared to the same period last year. ‘After years of unstoppable growth, this is the new normal for the luxury industry,’ says Federica Levato, a partner at Bain.

Europe: end of challenges for Chinese spending

This time last year, Global Blue saw an immediate negative impact on Chinese spending in Europe, due to dual factors: the introduction of biometric visas followed an intense summer spending period of Chinese taking advantage of positive currency FX.

These challenges have now ceased and the lower base in Q3 2015, combined with less volume of wealthy Chinese replaced by more middle-class spending overseas, is resulting in a more positive performance this year in Europe.

Regionally, Chinese spending has moved from -16% in September up to -3% in October, with the number of transactions also progressing up from -14% in September to -10% in October, while average spend has jumped from -6% in September to +7% for October, YoY.

Here the significant growth in average spend is partly due to the UK doubling its share of Chinese spending – from 8% in September to 15% in October YoY.

Europe’s changing of the guard: shifting destinations

While France remains in double-digit decline at -20% for the October calendar year to date (CYTD), Global Blue is seeing a shift from the traditional tax free destinations to more price-sensitive and FX-driven shopping locations.

The UK continues to see positive tax free spending patterns driven by favourable FX – for October CYTD, sales are up +9% and average transaction value is up +10%. Since the Brexit referendum vote and the continued soft currency, the UK has been seen as the most affordable market in Europe, with globe shoppers shifting their spending focus, especially for fashion purchases, from Milan or Paris to London.

Global Blue takeouts:

• October’s flat tax free sales performance in Europe marks a halt in the negative decline Global Blue has seen so far this year and could indicate growth is ahead in 2017, according to a recent presentation by Pier Francesco Nervini Chief Operating Officer North & Central Europe & Global Accounts at Global Blue at the Altagamma Observatory event. 

• The UK’s continued impressive sales performance this month helped Europe’s overall improvement, with London now seen as the region’s most affordable market for luxury shopping.