JAPAN REPORT: INTRODUCTION Duty free prospects in Tokyo remain bright


Travel retailers at Japanese airports are reporting double-digit growth for FY2017 and Q1 2018, as airports open arrivals shops for the first time and downtown duty free stores in Tokyo also register a rapid sales rise, says TRBusiness Asia correspondent, David Hayes.


The range of Japanese beauty products and brands in travel retail is now being extended alongside demand for manually operated beauty appliances. Shiseido and SKII are the two leading Japanese duty free cosmetics brands, along with Kosé, Albion and Shiseido Clé de Peau Beauté. These skus are increasing their listings in DF&TR. This growing trend for Japanese


Above: Perfume & cosmetics continues to be Japan’s fastest growing product category.


F


or the financial year ending 31 March 2018 (FY2017), Japan’s duty free industry registered


record sales as rising foreign visitor numbers drove travel retail revenue growth in airport shops and the country’s downtown duty free stores. Chinese visitors also had a huge influence on bumper year sales. According to all the operators


featured in this year’s Japan Report (134-169) they began spending heavily again following a disastrous year for luxury goods in 2016. As was well-reported by TRBusiness


at the time, China Customs had introduced new higher tariffs on luxury goods imports in April 2016. This coupled with stricter customs inspections, impacting luxury duty free sales at Japanese airports. Factoring in the recovery of Chinese


traffic and spend, it is therefore no surprise that Japan’s three largest international airports each recorded duty free sales growth of 20% or more in FY2017.


Factoring in the recovery of Chinese traffic and spend, it is therefore no surprise that Japan’s three largest international airports each recorded duty free sales growth of 20% or more in FY2017.


TRBusiness 134 TRBUSINESS


However, airside tax free sales, comprising mainly


Japanese


confectionery and electrical goods, increased at a slower rate of about 5-10%, as Chinese customers’ interest focused more on Japanese beauty products and luxury brands currently in high demand in China.


Foreign visitors +16% in H1 Meanwhile,


inbound visitors


continue to rise as Japan’s popularity as a tourist destination grows among Asian travellers. A total of 28.6m (+19.3%) inbound foreign visitors arrived in Japan in 2017, according to the Japan National Tourism Organization (JNTO). Foreign visitors are continuing to


grow this year, with 15.9m arriving in Japan during H1 (January to June), representing a 15.6% increase over the same period last year. Asian travellers accounted for


about 80% of all foreign visitors during the period. According to the JNTO, this included 4m visitors each from China and South Korea; 2.5m from Taiwan; 1.1m from Hong Kong and 600,000 from Thailand. In terms of product categories,


perfume & cosmetics continues to be Japan’s fastest growing, Japan’s leading duty free retailers have told TRBusiness. This accounts for between 40% and 60% of most airport and downtown operators’ total duty free sales.


beauty goods in China and other Asian countries is now encouraging some duty free retailers to introduce more from mid-priced local brands, as well as from the premium end. Some airports and downtown duty


free operators are taking this initiative even further by opening drug stores on their premises that operate as tax free outlets. These shops stock lower- priced ‘everyday’ Japanese skincare and makeup products, which previously have not been available in travel retail. In fact, demand for Japanese beauty


products has grown so fast over the 18 months that some Japanese travel retail operators have faced difficulties in obtaining sufficient supplies of popular goods. Two leading operators told


TRBusiness that SKII, which owns a factory in Shiga Prefecture, is building a new cosmetics plant to meet rising domestic and export demand (including duty free)


for its


popular products. SKII’s new plant is under construction and is expected to complete by 2019. Aside from P&C, tobacco is Japan’s


largest duty free category, which has grown in popularity among outbound Japanese travellers due to two increases in government tobacco tax rates in recent years. Duty free tobacco sales have


also been boosted by the sudden popularity of Philip Morris’ Iqos heated tobacco products in the past year. Chinese passengers in particular appear to be buying cartons of Iqos in Japanese airport shops due to a lack


OCTOBER 2018


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