END OF TAX FREE SHOPPING IN THE UK. Find out more what this means for merchants and partners.

Tax Free Shopping updates: What’s new in Europe?

With a good performance in 2017 and some growth drivers in place for 2018, what do retailers need to know about Tax Free Shopping trends in Europe?

With the Tax Free Shopping industry reaching new highs in 2017, Global Blue provides an overview of some key trends driving this performance and reveals opportunities for growth in 2018.

2017: A year of recovery in Europe

After challenges in 2016, Tax Free Shopping spend in Europe experienced a healthy growth of +8% in 2017, exceeding the record high levels of 2015.

We continue to monitor healthy dynamic in origin markets. Driving the growth was stronger inbound traffic from China, where travel and shopping demand are on the rise. Also, these Globe Shoppers are eager to discover new destinations. According to a recent report, the number of Chinese tourists to Europe continued to surge in 2017, with Europe being the second most popular destination for Chinese outbound tourists after Asia.

Other contributing factors include the devaluation of the British pound, which operated as a magnet to attract Globe Shoppers to Europe and the re-emergence of Russia’s Globe Shoppers, whose sales-in-store grew by +18%.

The resurgence of Turkey and Switzerland

After the damaging impact of 2015’s terrorist attacks, Turkey showed strong recovery in 2017, with +228% sales-in-store growth from Chinese Globe Shoppers and +136% from Russia.

The country is also off to a strong start in 2018; according to ForwardKeys data, Chinese traffic to Turkey increased considerably in January and February and the country’s national airline, Turkish Airlines, has announced plans of expansion between the two countries.

Switzerland also enjoyed an increase of +19% sales-in-store from Chinese during 2017, due to favourable exchange rates and improved visa accessibility, helped by the China-Switzerland Year of Tourism.

Fashion and clothing continues to thrive

At 55% share of spend globally, the Fashion and Clothing category is a key performance contributor and has seen a boost from Russian and Chinese Globe Shoppers, whose sales-in-store in this category were up +16% and +11% respectively in 2017.

A growth engine for this category is the outlet store; according to Tax Free Shopping data, outlets are performing better than full price shops of same brand name – for brands with average spend below €500, outlet sales-in-store is growing six percentage points ahead of their full price alternative.

Outlets present an opportunity to capture the spend of new Globe Shoppers who are motivated by value and can also provide incremental custom. Global Blue currently estimates 10% of Globe Shoppers will purchase at both boutique and outlet stores of the same brand.

The emergence of Indonesian Globe Shoppers

The presence of Indonesian Globe Shoppers became ever-more visible in Europe during 2017; they accounted for 17% of South East Asian spend in Europe, with sales-in-store growing +14% from the previous year.

Having previously been contained largely to Singapore, Indonesia is becoming a significant global player. With a growing middle and upper class (expected to reach 68 million and 73 million respectively by 2020), the opportunity for retailers to capture new spend from this market will continue throughout 2018 and beyond.

Key to attracting this audience is understanding its profile; for example, while Indonesians display a similar distribution of spend across categories as Chinese, they show a stronger favour towards Fashion and Clothing in Europe, accounting for 72% of their total spend.

In addition, Frequent1(39%) and Elite2 Indonesian Shoppers (33%) make up a more sizeable group in comparison to the global average (Frequent Shopper: 22%, Elite Shoppers: 20%) and therefore different tactics for drive-to-store should be considered.

How can European retailers encourage growth?

The Globe Shopping business is based on strong foundations. Yet, while 2017 produced new highs for luxury retailers across Europe creating a strong base of comparison for the year, less favourable FX rates concerning the euro and the pound against other major currencies (RMB, rouble and dollar) caused challenges in the first few months of 2018 and will most likely continue to do so for the first half of 2018.

In a more challenging environment, to continue attracting Globe Shopper spend, retailers should constantly reinvent and innovate their offering to deliver a seamless and personalised experience. For example, recent Tax Free Shopping innovations by Global Blue include:

To find out more, contact us.

1Shoppers who have done more than 3 trips in the last 24 months
2Shoppers who have spent more than €40,000 over the last 24 months