Duty-Free Travel Retailer Steps into Duty-Paid— Discover DFS's Business Vision and Strategy

In the evolution of China's domestic fashion retail industry, the 20th century was dominated by department stores. The 21st century saw a shift with the flourishing of shopping centers and e-commerce, along with the introduction of outlet malls in various major cities, competing for consumers' attention and share of wallet. Airport retail, though always stable, has been considered part of the travel retail industry due to its unique scenario and high entry barriers.

Fashion brands have long held mixed feelings about the domestic travel retail market. From 2019 to 2022, as major domestic airports initiated retail upgrades and invited high-end fashion brands to settle in, there were frequent announcements of international brands launching and upgrading airport stores. Yet, the brands' expectations for return on investment in airport retail — whether it's for brand image or genuine profitability — remains a topic they're reluctant to discuss openly.

Significant moves by industry leaders often indicate current and future trends. This can be seen in major tech companies' withdrawal from while in parallel heavy up investments in the metaverse and generative AI tools, international automobile companies investing in Chinese new energy automobile brands, and fashion brands acquiring quality fabric manufacturers.

Similarly, in 2023, post-COVID and with the swift recovery of global tourism, the actions of DFS, the world leading duty-free retailer in the Chinese market offer insights into the domestic travel retail market, especially for fashion categories.

In 2023, DFS has been making significant moves in the Chinese market:

• In late April, just before the "Labor Day (May Day) Golden Week", four DFS boutiques (including Kering Eyewear, Sunglasses Generic, Bally, and Armani) made soft opening at Chongqing Jiangbei International Airport.

• On May 30th, DFS signed a strategic cooperation agreement with Ctrip Global Shopping (携程全球购) in Shanghai. They will collaborate on marketing, online experience enhancement, and membership, providing advanced overseas travel shopping services. They also announced membership cooperation, allowing users to exchange Ctrip.com Group points for DFS vouchers and expanding the existing Trip.com Group cashback partnership to more DFS stores worldwide, including DFS Chongqing Airport stores in June. 

• In June, 11 independent brand boutiques, fully operated by DFS, officially opened at Chongqing Jiangbei International Airport. Meanwhile, DFS successfully won the bidding and secured a prime location in the airport's central business district, "STARRY GALLERIA", reserving space for more international luxury brand stores.

• On September 3rd, a grand event was held for the official opening of Chongqing Jiangbei International Airport's new business complex "STARRY GALLERIA". The highlight was the matrix of DFS boutique stores in the airport. By this time, DFS's operation spanned over 2,000 square meters of shop area (making it one of the largest duty-paid retail spaces in mainland China operated by a single travel retailer) and included more than 30 top international luxury brands. By the end of September, the global loyalty program "DFS CIRCLE" which offers Chinese consumers rewards for shopping at DFS stores worldwide will be officially launched.

Reviewing these activations, two indications become clear: As a globally renowned duty-free retailer, DFS's focus has been on duty-paid retailer operations, with a physical presence primarily at Chongqing Jiangbei International Airport. This duty-free travel retailer has earnestly begun its dual-engine-driven development strategy in the Chinese market, combining both "duty-free and duty-paid" retail strategies.

From the very beginning of formulating its business development strategy in China, DFS has determined a dual-engine driven frame. Given the policy limitations that existed in the domestic duty-free market, DFS decisively broke away from its path dependence in the short term and positioned itself in a broader travel retail business scale, attempting to carve out a new territory in the domestic market.<