India will be the fastest growing duty-free retail market for the next seven years as private players start operating shops in airports. By 2025, India will enter the list of top 10 duty-free markets as the cumulative revenues quadruple.
Indian duty-free retail market is expected to grow at a CAGR of 20.7 per cent till 2015, much ahead of the global average of 10 to 11 per cent. South Korea, the global leader in duty-free sales, will be growing at a rate of 9.6 per cent. China which currently is in the second place will see a growth rate of 11.3 per cent and the third largest market, US will see a low single digit growth, finds research and consultancy firm Red Seer. The global duty-free retail market is valued $65 billion.
Now, $200 million Indian duty-free market is not even there in the list of top 25 countries. But by 2025, the revenues would quadruple to $800 million and put Indian in the top 10 list.
Privatisation of airport duty-free shops has seen increased focus on improving sales. “GMR runs the RGIA Hyderabad duty-free, and has a JV with Aer Rianta to run IGIA Delhi duty-free as well. Airport Authority of India noticed the success of private players in duty-free and taken this segment seriously. It has appointed a master franchisee for 13 top Indian airports. The sales of these airport duty free shops have grown fast after the master franchisee took over operations,” said Shubham Anand, head retail, CPG Practice, Red Seer India.
Increase in the air connectivity has been bringing more passengers to the airports. The foreign tourist arrivals in India are increasing year on year by close to 12 per cent and are contributing to the rise in duty-free sales.
However, Indian duty-free market is different from its peers in one aspect - most of the consumers of duty-free goods from India are Indians themselves. The average contribution to total duty-free sales by Indians is more than 80 per cent. Placing pre-orders is most popular among them. The travelling Indian places an order before leaving for an overseas destination and the order is delivered on their return at a 5 -10 per cent discount.
Because of duty and tax- free products, domestic passengers buy more from these shops. The purchasing power of Indians too is on a rise.
Indira Gandhi International Airport in New Delhi operates the country’s largest duty-free retail space and the highest duty-free sales for any Indian airport. The duty-free shop in the airport has over 1000 brands and more than 43,000 products. Mumbai’s Chhatrapati Shivaji Maharaj International Airport comes second in terms of sales.