What is Duty Free & Travel Retail?
Duty free & travel retail is a global industry that generated annual retail sales of US$ 68.6 bn in 2017 and encompasses the sale of goods to international travellers. Duty free shops are exempt from the payment of certain local or national taxes and duties, normally with the requirement that the goods are only sold to travellers who will take them out of the country.
The Duty Free and Travel Retail Industry is sometimes confused with other channels.
Duty and tax Free sales are not ‘cross border trade’, are not ‘duty not paid’ and are not ‘Free Zone sales’. Duty free sales take place in a highly regulated retail environment governed by customs allowances, e.g. airports, ports, ferries, cruise ships and land border shops and their operations are governed by national customs authorities.
Products that can be sold duty free vary by jurisdiction and different rules based on duty calculations, allowance restrictions and other factors.
Airports represent the majority of such sales globally but duty free & travel retail is also available at border shops (under certain conditions, usually requiring the purchaser to spend a minimum amount of time outside the country), cruise & ferry shops on vessels in international waters, onboard aircraft during international flights, at some international railway stations and for the provisioning of ships sailing in international waters. It can also include downtown stores where proof of travel is required to purchase.
In many states, and in certain international institutions, the right to buy duty free goods is accorded to diplomatic and military personnel stationed outside their native country. The duty free departments of many companies serve this market although it is not considered part of the mainstream duty free industry.
Some jurisdictions (for example in non-EU Europe, Australasia, the Middle East and Latin America) offer travellers the opportunity to buy duty free goods on their arrival at their destination airport within the territory concerned. In such places, arrivals duty free has become an important source of revenue for airports.
In some territories, the term “travel retail” was coined to define the sale of products in a travel environment on which taxes and duties remain payable even though the customer may be travelling internationally. This is notably the case within the European Union, where the sale of duty free goods to customers travelling within the EU was abolished in 1999.
“Travel retail” is a term that commonly refers to sales made in travel environments where customers require proof of travel to access the commercial area, but which are subject to taxes and duties.
Duty free & travel retail generates vital revenues for national aviation, travel and tourism industries. Airports in particular increasingly rely on commercial revenues to fund the development of their infrastructure, and to help them keep the landing fees payable by airlines as low as possible. At airports across the world, retail is now the largest contributor to non-aeronautical income.