The Booming Bazaar A Look at the Future of Indian Travel Retail

The global travel retail industry, encompassing duty-free shops and other retail outlets catering to travellers, has undergone a metamorphosis in recent years.

While the COVID-19 pandemic caused a temporary setback, the sector is experiencing a vigorous resurgence. This is particularly evident in the Asia-Pacific region, where a burgeoning middle class, with increasing disposable income, is driving a surge in travel and retail expenditure. India, a rising economic powerhouse and tourist destination, stands poised to become a leader in this travel retail revolution.

The global travel retail market size is estimated to reach a staggering 108 billion USD by 2029, reflecting a compound annual growth rate (CAGR) of 8.1 percent [Incubees]. This growth is fueled by several key data points that include rising disposable income, shifting demographics and evolving consumer preferences.

According to a World Bank report, India's per-capita disposable income and gross national disposable income (GNDI) per capita has grown steadily. This translates into more money for individuals to spend on travel and travel retail purchases.

A 2023 report by PricewaterhouseCoopers (PwC) estimates that by 2030, the global middle class will be 5.3 billion, with a significant portion residing in Asia. These younger, brand-conscious travellers, representing a projected 80 percent of global consumers by 2030, according to a Euromonitor International report are a prime target audience for travel retail, seeking unique experiences and luxury goods. 

A McKinsey & Company study reveals that 70 percent of global consumers now expect personalisation from brands Travel retail is adapting to this trend by offering curated product offerings, loyalty programs tailored to individual travel habits, and targeted promotions.

Asia Pacific set to Dominate

The Asia-Pacific region is expected to dominate the global travel retail market, driven by the aforementioned factors and a thriving tourism industry. Here is a glimpse into the region's travel retail prowess. 

According to Airports Council International (ACI), Asia-Pacific airports handled 3.3 billion passengers in 2019, the highest globally. This vast pool of travellers translates into a significant customer base for travel retail outlets.

China is a major player in the Asia-Pacific travel retail market. A report by JLL estimates that China's travel retail market size to reach a staggering 86 billion USD by 2025. This phenomenal growth is largely attributed to the growing middle class and government policies promoting domestic tourism and duty-free shopping in locations such as Hainan Island.

Hainan's Duty-Free Boom

Hainan, a tropical paradise in southern China, has undergone a remarkable transformation in recent years. The Chinese government implemented policies liberalising duty-free allowances and establishing Hainan as a free-trade port. This has resulted in a phenomenal rise in duty-free sales, with Hainan exceeding even established players like Hong Kong. The statistics are staggering. 

According to a report by China Daily, Hainan's offshore duty-free sales surged to a whopping 10 billion USD in 2023, a significant increase from just 5.1 billion USD in 2019. The duty-free boom has attracted a surge in visitors. Hainan's tourism authority reported 90 million tourist arrivals in 2023, up 50 percent from prior year, a remarkable feat considering the pandemic's impact.

India's TR to Witness Stellar Growth

India's travel retail market, currently estimated at 2.03 billion USD, is projected to witness a stellar growth rate of 21.59 percent CAGR, reaching a projected value of 5.40 billion USD by 2029 (Mordor Intelligence]. This positive outlook is supported by several data points: 

Soaring domestic and international travel:

According to the Centre for Asia Pacific Aviation (CAPA), India's domestic passenger traffic is expected to reach 200 million by 2025. This, coupled with a growing number of international travellers, creates a vast customer base for travel retail outlets.

Rising disposable income:

The Indian middle class is rapidly expanding, with increased disposable income fueling a desire for travel and premium goods. Travel retail caters perfectly to this growing demand.

Infrastructure development:

India is witnessing significant investments in airport infrastructure, leading to the creation of larger and more modern travel retail spaces. This will provide a platform for a wider variety of brands and shopping experiences. Delhi and Mumbai both will boast brand new airports in the coming 12 months.

The airports in tier-ll cities of India that were hitherto used mainly for international connections are also seeing a huge demand for direct international flights.

Emerging Trends Shaping India's Travel Retail Future

Some of the key trends are:

Focus on personalisation:

Travel retail experiences will become more personalised, catering to individual preferences and travel goals. This could involve curated product offerings, loyalty programs, and targeted promotions. One sees more and more brands participating in local festivals in India and this trend is becoming a mainstream expectation from the Indian consumers.

Omnichannel retailing:

The integration of physical stores with online platforms will become increasingly crucial. Travellers will be able to browse products online, reserve items for in-store pickup, or opt for home delivery after their trip. This is an area in which domestic regulations also need to develop in India to be in tune with the times.

Rise of experiential retail:

Travel retail outlets will move beyond just selling products and create engaging experiences for customers. This could include interactive displays, product demonstrations, and brand storytelling initiatives.

Embracing technology:

Technology will play a vital role in enhancing the travel retail experience. This includes cashless payment options, self checkout kiosks, and digital signage for product information and promotions. Covid leap-frogged consumer comfort with the digital ecosystem and that is an opportunity for the travel retail industry to fully adopt and leverage.

Focus on sustainability:

With growing environmental awareness and with shoppers opting to show preference for brands and retailers operating sustainably, travel retail brands are likely to prioritise suitable practices. This could involve offering eco-friendly products, using recycled materials in packaging and store design.