Duty-free shop

Duty-free shop
See also
Deceptive advertising Free trade zone Trade allowance Growth company Barriers to entry Superior good Globalization Mass Merchandising Bricks and clicks model

Duty-free shop is a type of retail location in which the customer does not pay the country's taxes on the requirement that the goods will be taken out of the country they have been purchased in. They are one of the biggest parts of the airports' non-flight revenue and because of that, the airports are striving to increase the income coming from the shops as much as possible. Most often, they are seen on the international airports, but they are also located in ports, cruise ships, border towns, on-board international flights and some downtown stores as well.

Reasons for investing in duty-free shops

As recent data shows, air trasport is becoming the fastest growing type of transport and has potential to overthrow all of the other ways of transport as the most profitable one. It is the main source of revenue for the airports as well as one of the results of:

• Globalization;
• Population growth;
• Emerging market economic's growth
• Presence of low-cost airlines working on many domestic markets.

Duty-free shops have also become an opportunity for fashion industry - presence in duty-free shops gives them a chance of success and development as well as reaching new clients. The data shows that the interest in luxurious goods has been growing since the early 2000s. What explains the growth of interest in these types of products is psychology. Customers are more likely to spend their money on the airports, international railway stations, etc., because the aspect of waiting makes the decision to buy much easier to make and the situation of impulse shopping to appear.

History of duty-free shops

First ever duty-free shopping is believed to be done in 1940's in Northern Ireland as one of the ways for building up the trans-Atlantic business. Afterwards, it was noticed as one of the possible marketing actions that would make the client choose one airport over the other - competing airports used duty-free shopping as a tool for customer fighting. It was also a way for the airports to promote mobility of the potential clients. Now, the primal role of duty-free shopping has been overthrown by the custom it has become. While years ago travelers chose the airport on the base of the presence of duty-free shops, now, knowing every international airport has one, they only wander around them and spend their money there as a way of so-called tradition and to shorten their waiting time. There are brands created strictly for being a duty-free shop, for example WHSmith (a high-end store with higher-priced brands) and Pret-a-manger (a cafe, very often seen at the airports). Now, they are also opening their locations outside of the big transport areas (airports, international railways stations, etc.).

References

• Avery A. (2018), Airport retail in 2017: A year in review. "The Moodie Davitt e-Zine Report";
• Park J., Park K. (2018), The Effects of Airport Duty-Free Shop Servicescape on Emotional Response and Loyalty with an Emphasis on the Moderating Effect of Gender, "International Journal of Business and Society", Vol. 19;
• Rossi S., Tasca C. (2012), Consumer Behavior and Marketing Strategies in the Duty Free Market.

Author: Olga Muryn