Asia Pacific is acting as a global growth engine for the Tax Free Shopping (TFS) industry, with 2017 delivering impressive results across several key regional markets. Against the setting of this remarkable performance, Greg Gelhaus, Head of Asia Pacific at Global Blue, shares his views on Asia Pacific’s Globe Shopper sector.
What factors have influenced the Asian Globe Shopping industry in 2017?
International retail, or Globe Shopping, is strongly linked to travel patterns and Asia Pacific has benefitted from a number of conditions that have fuelled the travel industry over the past 12 months. Solid economic growth in China, along with a growing middle-class and rising disposable incomes, have led to an increase in outbound tourism.
In addition, the expansion of air travel across the region has continued unabated, particularly from low cost carriers, which has further increased the diversification of destinations and the empowerment of secondary and tertiary cities in countries like South Korea and Japan.
How has the TFS sector performed during that period?
12 months ago, the industry was still suffering from a slowdown in overall TFS sales which contributed to challenging trading conditions for many retailers throughout 2016. Despite an increase in TFS transactions throughout the year, lower average spend per transaction severely limited TFS sales growth across the region.
Fast forward 12 months and the outlook for the region could not be more different. Year-on-year TFS sales growth hit +39% in September 2017, a dramatic improvement over the same period during 2016, which saw growth flat at 0%. This performance is driven by healthy growth not only in the number of transactions, as the Asian tourism industry continues to thrive, but also from average spend per transaction.
As a result, retailers who remained focused on Globe Shopping and adapted business activities accordingly, have seen the benefits offered by this unique group of consumers and have emerged strongly from this slowdown.
Throughout this report, we will explore in detail the factors that have contributed to this turnaround in performance, from macro trends in origin markets, to new innovations in our Tax Free destinations.
Which nationalities have influenced the region this year?
Chinese visitors are clearly influencing every market within Asia Pacific and this will continue in the coming years. They account for over a third of Global Blue’s TFS transactions around the world and remain the biggest Tax Free spenders in Asia Pacific in 2017. The renewed confidence of this group has driven up Chinese TFS spend accordingly, with year-on-year TFS sales across the region increasing by +50% over the last quarter on 2016 figures.
However, we are also seeing a number of emerging Globe Shopper countries such as Indonesia, Thailand and India, that will grow in importance across the region over the next few years. These origin markets will be explored in greater detail throughout the report.
How can merchants better engage with Globe Shoppers?
Smarter use of data is one of the keys to helping our partners better engage with Globe Shoppers, allowing them to understand and target the most valuable visitors to Asia Pacific. Our segmentation work around Globe Shopper groups is a great example of how our data can add value.
Global Blue has identified three key groups of travellers; Infrequent, Frequent, and Elite, based on transactional data from the last 24 months. Frequent travellers have made more than three trips in the past 24 months and while they represent just 8% of total travellers, they contribute to 29% of TFS sales within Asia Pacific. Most interesting though is the Elite group, made up of travellers who spent above EUR40,000 over the last 24 months. Representing just 0.3% of total travellers, Elites accounted for over 23% of TFS sales within the region and made six trips on average in the last 24 months.
Through this kind of analysis, we are learning more about how these individuals shop and their spending habits, and more importantly, we are helping our partners to focus their resources on the right customers, at the right time.
What do you see as the prospects for the coming years?
Firstly, the growth of the TFS sector in Asia Pacific. The region accounts for approximately a quarter of Global Blue’s transactions worldwide, and as regional tourism growth continues to outstrip that of Europe, Asia Pacific’s share of global TFS activity will continue to grow. We should also consider that there are still many countries within Asia Pacific that do not currently operate refund schemes and we expect to see several of these launching Tax Free Shopping over the next few years, further expanding our industry’s footprint.
Secondly, there will be significant opportunities to accelerate growth within our current markets of operation through technology. Global Blue has recently launched innovations such as Mobile Customer Care and Fast Refund, that are improving the customer journey and increasing refund ratios. With a healthy pipeline of innovations designed to improve the TFS experience for both merchants and Globe Shoppers, Global Blue will continue to drive value and innovation for its partners.