Chinese tech giant Alibaba has agreed to form a joint venture (JV) with Swiss duty-free group Dufry, as Chinese shoppers’ appetite for overseas luxury goods seemed unfettered by the pandemic.
It also announced that it would acquire an up to 9.99 percent stake in the duty-free operator in a statement released on Monday.
Alibaba Group will have 51 percent controlling shares to Dufry’s 49 percent. The joint venture combines Alibaba’s established network and digital capabilities with Dufry’s China travel retail business and operational skills, the statement said.
“We expect this collaboration to drive growth in Asia and with Chinese customers worldwide with the support of new digital technologies,” said Dufry Chief Executive Julian Diaz on Monday.
As the coronavirus pandemic halts global travel, Dufry’s revenue fell by 62 percent to 1.59 billion Swiss francs ($1.74 billion) in the first half of 2020. It is increasing presence in China’s travel retail markets as effective containment of the outbreak allowed the country to travel again.
With 14,941 flights booked during the country’s eight-day National Day holiday that started on October 1, total air travel booking is comparable with the same period last year. Bookings for domestic flights have increased by 10.5 percent, data from China’s aviation authority showed.
Dufry is proposing a capital increase that will raise up to 700 million Swiss francs, which Alibaba is to subscribe to up to 250 million Swiss francs of shares.
China currently taxes imported consumer goods, such as garments and beauty products, an average of 6.9 percent and high-end cosmetics by 15 percent. But tariffs for many luxury products, such as perfumes and watches, exceed 30 percent.
Duty-free retail sales in the country exceeded 50 billion yuan ($7.36 billion) in 2019, according to a China Securities report.
Duty-free shops in China, which allow all travelers, not just international ones to buy, have seen a surge in sales.
South China’s island province of Hainan has offered greater visa-free access and duty-free shopping for tourists since July 1. Meanwhile, the annual quota for individuals making duty-free purchases on the island tripled to 100,000 yuan, and the duty-free product catalog increased from 38 to 45 items with some electronic products and wines newly added to the duty-free list.
China’s duty-free retail giant China Duty Free Group owns all four offshore duty-free shops in Hainan. Its parent company China Tourism Group Duty Free generated 19.3 million yuan in revenue in the first half of 2020, beating Dufry as the world’s largest duty-free retailer.
Its sales in Hainan were the primary driver for China Tourism Group Duty Free’s revenue boost, contributing 47 percent in the first half of the year. Hainan recorded 8.61 billion yuan in visitor duty-free spending from July 1 to September 30, a surge of 227.5 percent year on year, the local customs data showed.
Source: Hangzhou China