{"id":2844,"date":"2021-11-24T17:33:42","date_gmt":"2021-11-24T16:33:42","guid":{"rendered":"https:\/\/magazine.lineapelle-fair.it\/?p=2844"},"modified":"2022-01-20T16:49:56","modified_gmt":"2022-01-20T15:49:56","slug":"hainan-the-final-frontier-welcome-to-the-next-duty-free-paradise","status":"publish","type":"post","link":"https:\/\/magazine.lineapelle-fair.it\/en\/focus-en\/hainan-the-final-frontier-welcome-to-the-next-duty-free-paradise\/","title":{"rendered":"Hainan, the final frontier: welcome to the next duty-free paradise"},"content":{"rendered":"

China’s southernmost province, known as the ‘Hawaii of China’, the size of Belgium, inhabited by 9 million people, is set to become a duty-free paradise<\/a> and a new battleground for the luxury sector. Here’s how and why<\/em><\/strong><\/p>\n

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On 23 July 2020<\/strong>, the Tianwen-1 mission departed from the Wenchang<\/strong> space centre on the Chinese island of Hainan and landed on Mars<\/strong> on 15 May 2021. But China has planned another mission<\/strong> to Hainan, identifying it as the last frontier (for now) of a particular commercial horizon: turning it into the world’s largest duty-free paradise by 2050. <\/strong><\/p>\n

The next duty-free paradise<\/strong><\/h3>\n

Beijing unveiled its plan a month before Tianwen-1 took off. The island has historically been a place of exile for disgraced officials and criminals. A military outpost<\/strong> due to its strategic geographic location. A paradise for smugglers<\/strong> of foreign goods. And the scene of a crash between the US and Chinese military aircraft<\/strong> in 2001, will increasingly become a luxury shopping destination. Not surprisingly, McKinsey analysts believe it is time for luxury brands to develop a strategy for operating in Hainan.<\/p>\n

Pandemic consequence<\/strong><\/h3>\n

As a result of the pandemic and the subsequent suspension of international travel, Chinese consumers flocked to the island<\/strong>, encouraged by the central government’s decision to raise the cap on duty-free purchases and to extend the categories of tax-free goods. Total duty-free spending on the island in 2020<\/strong> was $ 4.3 billion<\/strong>, double the previous year’s $2.1 billion. 2021<\/strong> will be another record year, with the Hainan government estimating that it will exceed US$9 billion<\/strong>.<\/p>\n

In the last Golden Week, from 1 to 7 October<\/strong>, the island’s nine duty-free shopping centres grossed $252 million<\/strong>, an increase of 75% in 2020 and 359%<\/strong> in 2019. And by 2025<\/strong>, estimates suggest spending will reach $46.5 billion. So China’s southernmost province, known as the ‘Hawaii of China’, is set to become a new battleground for the luxury sector.<\/p>\n

The arrival of the brands<\/strong><\/h3>\n

Several brands<\/strong> (including Gucci, Ferragamo, Prada and Tod’s) have opened shops in Hainan. Other top brands<\/strong> (Chanel, Herm\u00e8s, Dior, Louis Vuitton) are either not present or have only landed in Hainan to sell cosmetics and perfumes<\/strong>. LVMH and its rivals are concerned that discounts could damage their brands’ image and aura of exclusivity<\/strong>, as well as erode margins and complicate the customer relationship.<\/p>\n

“As long as we talk to end customers and not daigou<\/strong>, we can do business in Hainan,” LVMH’s chief financial officer Jean-Jacques Guiony<\/strong> noted last October, commenting on the fact that Louis Vuitton is considering a presence on the island but not considering opening a duty-free store in Hainan. How many luxury brands will resist the temptation to do so?<\/p>\n

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