Swiss airport retailer Dufry forms JV with Alibaba to tap into China's duty-free market amid pandemic

Source: Global Times Published: 2020/10/5 17:37:51

Screenshot of Dufry website

Switzerland-based airport retailer Dufry AG said Monday it will form a strategic joint venture (JV) with Chinese e-commerce giant Alibaba in China, in a move to grab a piece of cake of China's booming duty-free retail sector at a time when international travel has been severely impacted by the global pandemic.

The parties will incorporate a joint venture, with Alibaba Group owning 51 percent and Dufry with 49 percent, according to the statement on Dufry's website. Alibaba will bring in its established network in China and its digital capabilities, and Dufry will contribute to its existing travel retail business in China. The Swiss group will also support the joint venture with its supply chain and strong operational skills, the statement continued.

As part of the collaboration, Alibaba plans an equity investment of up to 9.99 percent of Dufry's post-offering share capital.

"We expect this collaboration to drive growth in Asia and with Chinese customers worldwide with the support of new digital technologies," Julian Diaz, Dufry Group CEO, was quoted as saying in the statement.

The Swiss company's move came as China's duty-free retail sector booms thanks to the implementation of new duty-free shopping policy in South China's Hainan Province to unleash potential consumer spending and the country's new development pattern centered on "internal circulation."

In the first half of the year, China Tourism Group Duty Free Corp reported revenue of 19.31 billion yuan (US$2.86 billion), making it the globe's largest duty-free retailer. By contrast, Dufry - the world's No.1 for a couple of years - saw its revenues plunge over 60 percent to CHF 1.59 billion (US$1.73 billion) during the same period.

With steady economic recovery, domestic residents' consumption potential was further unleashed during the eight-day Mid-Autumn Festival and National Day holiday season from October 1-8.

The amount of daily foot traffic to four duty-free shops in Haikou, Sanya and Qionghai - all on Hainan - exceeded 1 million in the first two days of the holiday. Daily average sales revenues were more than double that of last year, statistics data showed.

Given that Chinese spend about $150 billion each year on overseas goods, China's domestic duty-free market of about 50 billion yuan ($7.37 billion) has great growth potential, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies of Renmin University of China, told the Global Times on Monday.

"Apart from Hainan, first-tier cities including Beijing, Shanghai, Guangzhou and Shenzhen in South China's Guangdong Province are expected to come up with policies to boost duty-free sector," Dong said.

Global Times

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