Shanghai Street View: Going Duty Free 沪经动向：开启免税时代
One of my biggest memories from my first trip to Hong Kong in the 1980s was the Duty Free Shoppers stores and the thrill I got from thinking about the massive savings they could offer on cameras, watches and other electronic gadgets for someone like me on a modest budget. Now Shanghai is taking steps to challenge Hong Kong’s decades-long stranglehold on the market with word that China’s commercial capital will soon open its own first duty-free store sometime next year.
Shanghai’s rush towards duty free shopping is part of a bigger pilot program that began in the southern resort of Hainan island, where the concept was first rolled out to promote tourism. It has proven so popular that it’s now being expanded to Shanghai and Beijing, promising to give Hong Kong a run for its money in the competition to attract cash-rich but bargain hungry Chinese shoppers eager to snap up the latest Rolex watch or Louis Vuitton handbag.
The latest reports say Shanghai has been studying plans to introduce duty free shopping for a while now, but finally received permission to go ahead the plan after receiving official approval from the Shanghai Municipal People’s Congress Standing Committee last week. (English article) The new policy will allow the Shanghai government to set up a duty free zone for retailers, and also to set up its own duty free store.
Shanghai has yet to announce specific plans, though one official at a city-backed research institute is saying the new store, and presumably the bigger duty free zone, could be developed somewhere near the city’s new Disneyland resort now under construction in an undeveloped are of Pudong. That resort, which is set to open in 2015, is part of broader entertainment hub that Shanghai hopes to create as part of its attempt to draw more out-of-towners to the city and reclaim its title as an Asian tourism hub.
Based on Hainan’s experience and the bigger Chinese fascination with Hong Kong, the duty free shopping concept is indeed one that has huge attraction for Chinese consumers. Whenever I tell any of my friends of a planned trip to Hong Kong, at least 1 or 2 inevitably asks me to bring back the latest gadget, cosmetics or luxury item, not because they can’t buy them in China but because they are vastly cheaper in Hong Kong. One Hong Kong friend in the retail business told me his shops began selling luxury goods in the last couple of years, and sales to mainland Chinese have quickly soared to overtake his much older line of middle-range clothing.
Likewise, barely a week goes by without reports and images in the Chinese media of happy shoppers emerging with bags full of newly purchased luxury goods from Hainan’s duty free stores, one at the airport in Haikou and the other in the city of Sanya near the major resorts. The Hainan scheme has been so successful that the city recently announced it is crafting a plan to create a network of more duty free shops around the island.
So clearly the demand is there, and duty free shopping looks like a strong ingredient to creating successful tourist hubs. So, what’s my take on this new Shanghai plan and its chances for success? In a nutshell, I’m extremely confident that the city will find ways to not only open a smart, well-run duty free store and zone, but could quite possibly take the concept to the next level by creating new kinds of shopping experiences. This kind of thing is what Shanghai does best, drawing on its roots as a business center to commercialize just about anything, from developing well-conceived business districts like the slick shopping streets on Nanjing and Huaihai roads, to redeveloping historic areas like the Bund.
If the city is smart, it will indeed locate this new duty free shop out in the Disneyland area, where there’s plenty of room for new development and the concept can be quickly expanded to meet demand. If it executes well, which it usually does, the city that was historically known for its glitz and glamor could soon find itself attracting legions of shoppers from not just China but perhaps across Asia, who will flock there not only for its historic and modern attractions but also for its booty of tax-free luxury goods.
