[Report] "No Seats Even on Shuttle Bus"... Shoppers Crowded at China Duty-Free Shop as Large as 17 Soccer Fields

[Report] Visiting Sanya International Duty-Free City in Hainan, China

"The shuttle operates from 9 a.m. to 9 p.m., and passengers board with almost no empty seats. You need to reserve your seat in advance."

On the 19th, at the back gate of Sanya International Duty-Free City (CDF Mall) located in the eastern part of Sanya on Hainan Island, China. About 20 free shuttle buses traveling between the duty-free shop and various hotels on the island were waiting and continuously transporting visitors. One shuttle driver said, "Since the reopening (transition to With-Corona), buses have been operating on different routes," adding, "Nowadays, there are so many people that I don't finish work until around 10 p.m." This reservation-based bus service had been quiet due to the impact of COVID-19, but recently, even with increased operations, it is so crowded that it is difficult to board at the desired time.

On the 19th, Sanya International Duty-Free City (CDF Mall) located in the eastern part of Sanya on Hainan Island, China. After a simple baggage inspection, you can enter the store. (Photo by Kim Hyunjung)

China's duty-free business is aiming for a 'With-Corona' boom, backed by the government's full policy support. Especially after China's transition to With-Corona, visa-free entry to Hainan Island has been allowed since the 15th, creating a favorable environment for the recovery of overseas tourism. In addition, the government has continuously announced regulatory relaxations to enhance shopping convenience, openly 'pushing' the duty-free business.

'Overwhelming in Scale' Mega Duty-Free Store... No Hermes

Located near the beach, the CDF Mall is the world's second-largest duty-free store, operated by the state-owned China Duty-Free Group (CDFG), with a size equivalent to 17 football fields (120,000㎡). Originally developed exclusively for domestic customers, some brands allowed foreigners to purchase using passport and flight information.

On the 19th, at the east gate of Sanya International Duty-Free City (CDF Mall) located in the eastern part of Sanya, Hainan Island, China. About ten free shuttle buses traveling between the duty-free shop and various hotels on the island are waiting and continuously transporting visitors. (Photo by Kim Hyunjung)

The most striking feature is its overwhelming scale, comparable to a large domestic mega shopping mall. Construction was underway for new brand stores in areas A, B, and L (food and beverage). Even that was not enough, and additional construction for area C, including more stores and hotels, was in full swing on adjacent land. Based on area alone, it is seven times larger than Lotte Duty-Free World Tower branch (17,300㎡), the largest in Korea (city standard).

However, when looking at the secured brands and product composition inside the store, there are many shortcomings compared to Korean duty-free shops. The CDF Mall has yet to include the 'big three luxury brands'?Hermes, Louis Vuitton, and Chanel?which are benchmarks of duty-free capabilities. In famous brand stores like Prada, Gucci, Ferragamo, and Loewe, it was often difficult to find new products or popular models due to sold-out items.

In cosmetics, prices were generally more than 30% less competitive than Korean duty-free shops, and high-end brands like Est?e Lauder and Lemaire had many products priced more than twice as high. A Chinese customer named Wang Yue, whom we met locally, said, "Prices are only slightly cheaper than department stores, so they are not particularly attractive," adding, "People come here because they don't have to worry about counterfeit products."

Sanya International Duty-Free City (CDF Mall) located in the eastern part of Sanya, Hainan Island, China. In addition to Zone A and Zone B, construction of Zone C for additional stores and hotels is underway. (Photo by Kim Hyunjung)

Growing CDFG Backed by Full Government Support

The unstoppable expansion of CDF Mall is seen as confidence derived from recent rapid growth. While global duty-free companies struggled due to overseas travel restrictions caused by the spread of COVID-19, CDFG rose from 4th place globally in 2019 to 1st place in 2020, thanks to the Chinese government's full policy support. In 2020, the government raised the duty-free limit from 30,000 yuan (about 5.46 million KRW) per year to 100,000 yuan and abolished the single-item limit regulation (8,000 yuan), which had a significant impact (the Korean duty-free limit is about 1.02 million KRW). Although it ended unsuccessfully, CDFG recently participated in the bidding for the business rights to enter Incheon Airport Duty-Free, indicating its keen interest in the Korean market.

Furthermore, the Chinese government decided to allow on-site pickup for duty-free goods priced under 20,000 yuan to enhance customer convenience. Until now, goods had to be collected at designated locations such as airports, train stations, or ports, but starting from the 1st of next month, items within the price limit among 15 categories, including cosmetics, sunglasses, and baby formula, can be picked up on-site and used immediately.

While domestic companies have repeatedly engaged in cutthroat competition due to the government's excessive issuance of business rights and astronomical airport duty-free rents during the duty-free boom, CDFG, as the biggest competitor, is instead gaining opportunities to expand its size thanks to government support. An industry insider said, "Duty-free business is based on economies of scale in terms of purchasing power," and pointed out, "While Korean companies are preoccupied with internal competition and losing ground, Chinese companies are thriving backed by government support."