Welcome to Duty Free Facts
Duty Free Facts is – first and foremost – a resource for anyone wishing to better understand the duty free world and the important contribution it makes to the wider travel industry, national economies, and the hubs and communities that support global travel.
Duty free has been a trusted source of authentic, high-quality goods for travellers for over 75 years. Modern security systems and innovations have ensured that the industry now boasts one of the most secure and robust supply chains of any industry in the world, and provides consumers and regulators with the confidence that the products being sold are correctly sourced, transported and retailed.
This resource is made possible by the combined efforts of the Duty Free World Council and Tax Free World Association, and supported by a global network of regional travel retail associations representing markets across Europe, Asia Pacific, the Middle East and Africa, and the Americas.
What is Duty Free
Duty free and travel retail is a global industry selling goods to international travellers. Sales in duty free shops are exempt from the payment of certain local or national taxes and excise duties, normally with the requirement that the goods are only sold to travellers who will take them out of the country. Products that can be sold duty free vary by jurisdiction and different rules based on excise duty calculations, import allowance restrictions and other factors.
The duty free and travel retail industry is sometimes confused with other channels, duty- and tax-free sales are not “cross border trade”, are not “duty not paid” and are not “Free Zone sales”. Rather, the duty free industry is comprised of global, regional, and national operators of an industry throughout the world. These are law abiding businesses providing economic benefit to transport terminals and services by generating important commercial revenues.
Where does Duty Free and travel retail come from
Duty free and travel retail has become a hugely successful worldwide industry since the first shop opened in Shannon airport, Ireland in 1947.
Shannon Airport, on the west coast of Ireland, pioneered the concept of duty free and travel retail as it developed from the 1940s and 1950s to serve the growing trans-Atlantic airline market. In 1947, construction of terminal facilities and runways were completed and the Irish Government passed the Customs Free Airport Act by which transit and embarking passengers, goods and aircraft were exempt from normal customs procedures. Shannon Airport had become the first Customs Free Airport in the World and established Shannon as an International Industrial and Distribution Centre and stimulated further traffic growth.
The Shannon Sales and Catering Organisation was licensed by the Irish Department of Transport, enabling Shannon to conduct commercial and catering activities at the airport. In 1947, the world’s first duty-free shop opened at Shannon Airport, and began as a simple kiosk measuring, selling souvenirs and gifts. The Duty Free shop became an immediate success and this concept has been copied worldwide. Creating that alternative source of income for airports was the rationale behind the creation of duty free - that need is as great now as it was in 1947.
Why is it important to the travel community?
Duty free and travel retail generates vital revenues for national aviation, travel and tourism industries. Airports, increasingly rely on commercial revenues to fund the development of their infrastructure, and to help them keep the landing fees pdown. As international travel recovers from the damage caused by Covid-19 related travel restrictions, the revenue generated from duty free and travel retail sales has never been more crucial to the sector’s financial health.
Duty free - What industry means in terms of the amalgamation of retailers, brand supplies, and the people cooperating across both.
Duty free and travel retail has evolved and grown in parallel with the development of air and sea travel within Europe over the past 65 years or so. Retailers have been able to work effectively with airports and ferry lines to encourage travellers to engage in discretionary shopping as part of their journey. This in turn has supported the growth in air and sea connectivity within Europe.
For many brands, whether start-up companies or large established companies, the duty-free retail channel is a unique marketing opportunity allowing them to launch brands to an international audience without the massive cost of a global product launch. A large percentage of the products in stock are made or adapted specifically for an international market. In many cases, success in global duty-free gives brand owners the confidence and the knowledge of national tastes and preferences to expand into new markets.
Nevertheless, duty free sales take place in a highly regulated retail environment governed by customs allowances, e.g. airports, ports, ferries, cruise ships and land border shops and their operations are governed by national customs authorities. Products that can be sold in duty free vary by jurisdiction and different rules based on duty calculations, allowance restrictions and other factors.
A driver of non-aeronautical revenue
Aeronautical and non-aeronautical activities represent the two main sources of income for airports. Aeronautical revenues traditionally accounted for the majority, as they are based on terminal rentals and other charges applied to passengers, aircrafts and security.
The importance of non-aeronautical sources – including duty free and travel retail sales – has grown significantly in the recent decades, as airports sought to diversity their commercial activities and improve the passenger experience. Prior to the Covid-19 pandemic, up to 40% of global airport incomes were provided by non-aeronautical sources for some airports, and in many airports in Asia and the Middle East, this proportion rose to over 50%.
Duty free and travel retail sales make up the majority of non-aeronautical revenues, in addition to other sources such as car parking charges, real estate income, and sales of food and beverages. In 2017, duty free and travel retail sales generated 68.6 billion USD globally, and it is estimated that travel retail supports over 250,000 jobs across the world.
As much of the revenue generated by these sales is reinvested, the duty free and travel retail industries thus make an important contribution to the financing of airports, and to improving the connectivity and infrastructure of surrounding areas.
In recent years, duty free and travel retail sales have also proved to be a vital economic cushion during periods of hardship. Though dependent on passenger numbers, without these sales it is likely that there would be a far higher numbers of loss-making airports and/or higher levels of state subsidy. As international travel resumes and many airports and travel hubs seek to tackle the debt accrued during the pandemic, the commercial revenue received from duty free and travel retail sales will only increase in importance.