JAPAN REPORT: INTRODUCTION


of availability in China. Japanese operators are also


reporting that duty free liquor sales remain stable. However, sales of leading Japanese whisky brands have been limited by insufficient stock due to under-investment in expanding whisky production following the 2008 global financial crisis. Meanwhile, luxury brand boutique


sales have registered an upturn during the past year and growth should accelerate once renovations to a number of boutiques are complete at Tokyo’s Narita and Haneda international airports. Both airports are undergoing major


refurbishments and expansions to their duty free shopping facilities in preparation for the Tokyo 2020 Olympic Games. Haneda is preparing to launch an


international passenger terminal expansion scheme. This will involve converting part of the existing domestic Terminal 2 to serve international flights under the Tokyo International Air Terminal Corporation (TIAT), which runs Haneda’s existing international terminal. (See separate TIAT report on p147).


Downtown upturn Meanwhile, Japan’s duty free industry recently entered a new era with the introduction of airport arrivals shopping. Narita Airport became the first airport in September 2017, opening two shops in T2, followed by three more in T3 in November and T1 in December. All five shops are operated by FaSoLa Duty Free. Additionally, four other airports


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with the government to expand the range of items to include perfume and cosmetics. Tobacco products comprise the main bulk of stock. Off-airport, Japan’s downtown


duty free shops have experienced a sudden upturn in business during the past 12 months, as Chinese free independent travellers (FIT) and group tour customers have surged. Sales in Tokyo’s three downtown


duty free shops have grown about three-fold since October 2017, as Chinese visitors have become more aware of the stores’ existence. Chinese daigou trader customers responsible for


are partly


this, driven by the demand for Japanese cosmetics. However, Japan’s daigou sales


are not expected to reach the same level as South Korea’s, as Japan’s operators closely follow cosmetics manufacturers’ sales guidelines, which limit the sale of products to a maximum of three per customer. With downtown duty free income


rising, operators are expressing interest in opening downtown stores in new cities including Osaka. Overall, it is fair to say that the


outlook for Japan’s duty free industry remains bright for most of country this year, following a strong start. Leading airports reported double-digit travel retail growth during Q1 2018 and most expect the trend to continue for the rest of the year, presuming foreign passenger numbers continue to rise.


TRBusiness However, prospects for Osaka’s


Kansai International Airport remain unclear. In the immediate term, international flights at Kansai Airport were suspended due to damage caused by Typhoon Jebi, which caused widespread disruption across western Japan on 4 September. Domestic flight services resumed


three days later and the first international flight, All Nippon Airways (ANA) to Shanghai, departed the following day using a single operational runway, while the other runway remains flooded. In addition to ANA resuming


flights to Shanghai, LCC carrier Peach Aviation soon resumed flights to Hong Kong, Seoul, Busan, Taipei and Shanghai the day after restarting domestic flights (7 September) from Terminal 2. Plans have been proposed to transfer some international flights temporarily to Osaka’s Itami Airport as well as Kobe Airport. However, neither airport currently


has facilities in place to handle international flights. See TRBusiness.com for more recent updates on Kansai Airport. «


have opened arrival duty free shops this year as the government meets foreign visitor demand ahead of the 2020 Tokyo Olympic Games. Tokyo’s Haneda Airport has opened


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Tax free sales boosted by confectionery


a small arrivals shop on a trial basis, while three arrivals shops operated by ANA Duty Free opened in Spring. Centrair (Chubu) International Airport and Fukuoka International Airport are two others that opened single arrivals shops. TRBusiness also understands that Kansai Airport now has arrivals shops. These shops are currently limited


to selling liquor and tobacco, though discussions have started


OCTOBER 2018


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Japanese duty free operators’ tax free sales have continued to grow consistently in the last 18 months, driven mostly by Japanese confectionery, electrical goods, sake and souvenirs. Tax free sales account for 40-45% of total


commercial revenue at Narita International Airport, for example, and are similar in size to duty free sales. Income from tax free purchases also


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represents an important share of travel retail sales at other Japanese airports. Leading confectionery brands including


Tokyo Banana are launching new products especially for the travel retail market, which make good gifts, priced at around JPY 1,000 ($8.9) to JPY 1,500 ($13.5). These product prices appeal to tourists


TRBUSINESS 135


and travelling businessmen, according to Japanese operators. Cheesecake from Hokkaido has also


become popular in airside tax free shops, while other confectionery brands including Kit Kat produce special packs – also designed for the travel retail market.


Sales in Tokyo’s three downtown duty free shops have grown about three-fold since October 2017, as Chinese visitors have become more aware of the stores’ existence.


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