第一太平戴维斯-零售热城·海南零售市场报告（英文）-2021.4-8页_2mb

Hainan Retail Summary

Core Content

Hainan's retail market has shown significant growth, particularly in the duty-free sector, driven by local consumption and tourism. The introduction of the off-island duty-free policy in 2011 and subsequent reforms have positioned Hainan as a key player in China's luxury and duty-free retail landscape.

Main Points

• Retail Growth in 2020:

  • Hainan's retail sales grew by 1.2% YoY in 2020, outperforming the national average by 5.1 ppts.
  • Retail sales of enterprises above designated size increased by over 20%.
  • Cosmetics and jewellery sales surged by over 100%.
  • Duty-free sales in Hainan reached RMB27.5 billion, contributing 14% of the province's retail sales.
  • Duty-free shops (including tax-paid sales) recorded a 127% sales growth in 2020, amounting to RMB32.7 billion.
  • Duty-free shops contributed 7% to 9% of China's total luxury sales in 2020.

• Strategic Positioning:

  • Tourism is one of Hainan's twelve key industries and accounts for 7.3% of GDP in 2020.
  • The island is strategically positioned as an international tourism and consumption centre, which will continue to shape retail policies and development.

• Duty-Free Policy Reforms:

  • The annual off-island duty-free allowance was raised to RMB100,000 per person from RMB30,000.
  • The number of tax-free categories expanded from 38 to 45, including electronic products and liquor.
  • A limit was imposed on the number of items that can be purchased per visit for cosmetics, phones, and liquor.
  • New licenses were issued to Hainan Tourism Investment Development and Hainan Development Holdings, allowing them to operate off-island duty-free shops.

• Market Expansion:

  • As of January 2021, Hainan had nine duty-free shops, with seven located in downtown areas.
  • The policy change allows for mail delivery services for tourists, enabling them to collect duty-free goods upon returning to the island.
  • The government is introducing more duty-free trading entities to enhance market competitiveness and attract consumption.

• Future Goals:

  • Hainan aims to achieve RMB300 billion in duty-free sales during the 14th Five-Year Plan period (2021-2025), averaging RMB60 billion per year.
  • The implementation of a zero-tariff regime for certain imported goods is a key task before 2025.
  • A positive list of imported goods will be introduced, allowing residents to purchase certain items without tariffs.

• Retail Market Structure:

  • Haikou and Sanya are the two largest consumption markets in Hainan, contributing 42% and 19% of the total consumption, respectively.
  • These cities also saw rapid recovery from the pandemic, with YoY increases of 1.5% and 12.1%, respectively.
  • Haikou's retail property market is dominated by shopping malls, with a total stock of 1.2 million sq m.
  • Sanya's retail market is diverse, including shopping malls, department stores, retail streets, duty-free shops, and outlets.

• Retailer Perspective:

  • Luxury retailers and developers are optimistic about Hainan's future, especially with the introduction of an independent customs regime.
  • Operators are looking to expand their presence in Hainan, with a preference for top-class developers and shopping centres.
  • JD Worldwide has already opened a duty-free store in Sanya and is expected to expand its offerings.

• Competition and Cooperation:

  • China Duty Free Group (CDF) dominates the duty-free market with a nearly 90% market share in China.
  • New entrants are likely to partner with experienced players to secure market share.
  • The in-island duty-free policy is expected to complement the off-island sector and drive further growth.

Key Information

• Duty-Free Growth:

  • Duty-free sales in Hainan reached RMB27.5 billion in 2020, a 104% YoY increase.
  • The duty-free market is expected to grow significantly due to the zero-tariff policy and increased consumer spending.

• Market Share:

  • Duty-free shops accounted for 17% of Hainan's retail sales in 2020, up from 7% in 2019.
  • Haikou and Sanya combined accounted for 63% of retail sales in Hainan in 2020.

• Policy Impact:

  • The zero-tariff regime is a key policy goal for Hainan, aiming to attract more consumption and boost the retail sector.
  • The introduction of the independent customs regime and the expansion of duty-free categories are expected to enhance the retail environment and attract more international brands.

• Economic Drivers:

  • Tourism remains the main driver of retail growth in Hainan, with the island's strategic positioning as an international tourism and consumption centre.
  • The development of emerging industries and the influx of young talent are expected to further boost household income and retail growth.

Summary of Growth and Development

• Haikou:

  • A major retail hub with 10 retail areas.
  • Shopping malls dominate the market, with a total stock of 1.2 million sq m.
  • Vacancy rates increased to 16.9% in 2020, but market confidence and favorable policies are expected to drive future growth.

• Sanya:

  • A popular tourist destination with 6 major retail areas.
  • Highly dependent on tourism, with duty-free shops and outlets playing a key role.
  • The city's retail market is transitioning from a department store-led model to a shopping centre-led model.

Conclusion

Hainan's retail market is poised for continued growth, especially in the duty-free sector, due to favorable policies, increased consumer spending, and the island's strategic positioning as an international tourism and consumption centre. The expansion of duty-free categories, the introduction of a zero-tariff regime, and the development of shopping malls and retail areas are key drivers of this growth. The involvement of major retailers and developers, along with the potential for independent customs operations, further enhances the market's prospects.