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Europe update: Strong euro halts TFS growth in Europe


Tax Free Shopping (TFS) spend in Europe declined during September after nine months of consecutive growth, with overall sales falling by -10% year-on-year. We explore the factors that contributed to this decline and how induvial markets fared across the continent last month.

Highlights

  • European TFS sales growth declined during September, down -10% year-on-year
  • The strengthening of the euro and the decrease in visits to Europe from many nationalities, were major factors in this decline
  • The softening impacted all countries, while Germany continued to see the effects of reduced group travel

 

After nine months of consecutive growth, European TFS sales declined during September, down -10% year-on-year. This was caused by a fall in the number of transactions across the region, down -10% last month, while average spend per transaction remained stable at +1%.

This drop in transactions can in part be attributed to the shrinking spend of most Globe Shopper nationalities as the euro continued to strengthen against most major currencies. Year-on-year figures are also being compared to a particularity strong period for European TFS in 2016, which also contributed to last month’s decline.

Chinese growth slows

September is historically a slow month for Chinese TFS spend in Europe, sandwiched between peak summer season and Golden Week in October. Following a slowdown during August (+1% year-on-year), sales from Chinese Globe Shoppers fell by -9% during September. This was driven by a -13% decline in transactions as tourists, particularly Globe Shoppers in group tours, were deterred from visiting the region by an increasingly competitive euro.

Americans perform strongly

Americans were the top performing Globe Shopper group during September, with TFS sales across all European destinations relatively flat at -2% year-on-year. While the dollar continued to soften against the euro last month, the decrease in TFS spend from US Globe Shoppers was not as significant as that of other nationalities.

Key markets all suffer

Performance dipped across all major European TFS sales markets as all Globe Shopper nationalities posted negative growth in September YoY.

  • Germany experienced the deepest sales decline at -27% year-on-year, with performance linked to continued shifting travel patterns from Chinese visitors.
  • The UK (-11%) and Italy (-8%) both saw a decline in overall sales, while maintaining positive year-on-year average spend growth (+3% and +2% respectively).
  • Spain and France experienced modest year-on-year drops in both number of transactions (-4% and -7% respectively) and average spend growth (-2% and -1% respectively).

 

Positive gains for luxury sector in Q3

While September performance was less positive than previous months, it concluded a successful Q3 for Europe, particularly for the luxury sector. September’s decline in sales, caused largely by the slowdown in less affluent tour group travellers and other external factors, had less impact on higher value transactions, helping luxury sales remain buoyant.

During the quarter, Europe’s four biggest TFS markets saw positive growth across higher spend intervals, with the number of transactions between 2,000EUR and 5,000EUR increasing by +3% and transactions above 5,000EUR up by +2% year-on-year. This performance was strong compared to lower value transactions (under 750EUR), which fell by -5% over the same period.


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