Hainan raises the retail bar ....
New legislation has given the island, the most southerly point off the China coast, a new lease of life.
It is starting to become a fashion that Asian countries find an island in the sun, revamp it, and then raise a flag saying 'I'm duty-free, shop here'. So it is with Hainan, the tropical paradise that is turning into a giant shopping mall following its designation as a pilot duty-free location for domestic Chinese consumers.
The government move is a clever way of keeping spending inside the PRC. Wealthier Chinese consumers often travel outside the country looking for luxury brands to buy - often because they don't trust the provenance of products found in the local market, and also because they are a lot more expensive. By creating an internal duty-free destination, the Chinese government hopes to empty Chinese wallets in its own backyard instead of in Singapore, Japan and South Korea.
There are terms and conditions to this benefit. Duty-free goods can only be bought if travel to the island is by air and spending must not exceed CNY8,000 (effective from November 2012) plus the bonus of a single item above this amount. Shopping sprees are also limited to twice a year and once for residents of Hainan province • the province comprises some 200 small islands of which Hainan island is the biggest, hence the name.
So what's in store - literally? Well, because the legislation is new - and also ties in with a wider ambition to make Hainan an international tourism destination - the duty-free offer is expected to get bigger all the time as more retailers try to enter the market. In May for example, Hainan-based HNA Group, opened an airside duty-free shop selling mainly beauty, liquor and tobacco products at Haikou Meilan International Airport - Haikou is the provincial capital - to target departing Chinese passengers.
But the main focus is in Sanya, the southern town where most tourism and the best beaches are located. Here China Duty Free Group (CDFG) has been developing a giant store complex since the start of 2010 which was finished at the end of that year and covers more than 7,000 square metres.
It is wall to wall luxury with boutiques for many big name fashion and jewellery brands • something you do not see in airports in China where they tend to have smaller positions or corners. Among the labels are Bally, Burberry, Coach, Dunhill, Ermenegildo Zegna, Gucci, Hugo Boss, MCM, Salvatore Ferragamo, Tiffany, and Tumi. Gucci and Tiffany both made their debuts in Chinese duty-free in Sanya and the Coach store is its only duty-free boutique in the PRC.
Among the watch brands present with boutiques are Omega, Montblanc and TAG Heuer while fragrances and cosmetics is well served with 1,500 square metres that includes the leading brands such as Biotherm, Christian Dior and Lance, some never before on the island. In fact the five best-selling categories at the CDFG store have been cosmetics, watches, luggage and leather goods, perfume, and small leather goods.
The problem you may find here is that demand for luxury brands is so high that queuing to enter boutiques is common and is considered a fact of life • not surprising perhaps if you know you are going to get 30% off a thousand dollar handbag!
Watch out for promotion while you are on the island. In summer 2011, the Mandarin Oriental hotel, in association with CDFG ran a Spend & Save promotion in which it invited guests to double their duty-free savings with a complimentary credit of CNY1,500 (US$230) to use at its restaurants and bars or spa when they shopped at CDFG's store, a 10-minute drive from the hotel. As CDFG has deals with around 100 travel agencies for bringing tourists to its store, other promotions are bound to pop up.
Finally if you think all this dedication to shopping is a bit over the top, CDFG has only just begun! At Haitang Bay, also in Sanya, the company is going ahead with plans for an ever bigger retail complex that will dwarf the current one. That is still some time off but it is quite possible that, with all the development planned, Hainan will eventually become a global luxury shopping hub.
- Tourism traffic 2010: Overnight tourist numbers to Hainan reached 25.9 million, 663,000 of which came from outside China. Some 4.06 million visited Sanya in the first half of 2010 (+19.5% year on year)
- International airports: Haikou Meilan International and Sanya Phoenix International.
- Airlines at Sanya: Just over 20 of which the biggest (by number of routes) are Hainan Arlines, China Southern, Deer Jet, China Eastern and Shanghai Airlines.
- Worth knowing: Russia has become the top overseas market for Sanya, accounting for a third of total overseas tourists. It is also the fastest growing market.