Source: Juchao WAVE
Text | Hu Mo
Editor | Yang Xuran
Once upon a time, relying on the return of consumption in the huge duty-free market, China's annual revenue exceeded 60 billion and net profit exceeded 10 billion. At that time, everyone firmly believed that China's duty-free market was in the ascendant, and even due to closure and other reasons in 2022, China's exemption performance was deeply affected, and the stock price was strong and strong.
Performance of China China exemption Stock Price (from January 2011 to present)
However, when the impact of the epidemic subsided, China's exemption performance has not been realized. In 2023, the net profit of China exemption is 72.Spinthewheeltowinrealmoneynodeposit.66 billion yuan, compared with the peak of 123SpinthewheeltowinrealmoneynodepositThere is a big difference of .65 million yuan. In the first quarter of this year, China's revenue was 18.807 billion, down 9.45% from a year earlier, while net profit was 2.435 billion yuan, down 1.25% from a year earlier.
Affected by this, the share price of China exemption has also been falling, and now the share price has fallen to a fraction of its peak.SpinthewheeltowinrealmoneynodepositA phenomenal bear stock.
In the short term, China's exemption performance may be hard to improve-there is not much good news that middle-class consumers continue to tighten their wallets, duty-free licenses are gradually liberalized and competition between channels is increasingly fierce.
So, what conditions do China's exempt investors need to wait for a big reversal?
Middle class consumption is completely reversed.
The expected improvement in middle class income is the basis for the reversal of the duty-free market.
Under the economic fluctuation, the middle class who have more than 10 million mortgage loans, their spouses do not go to work and their second children are in the international market are downgrading their consumption.
According to the New Middle Class White Paper, 43 per cent of new middle-class households' assets shrank in 2023, compared with 31 per cent in 2022 and 8 per cent in 2021, while only 17.5 per cent of respondents said 2023 was a year of asset expansion.
Affected by this, the painting style of middle-class consumption changed abruptly. The lowest prices of the fuel cars once loved by the middle class, Land Rover and Cadillac, are as low as ten to 200000, which is more than enough compared with the previous boom, with the avalanche of cultural consumer prices represented by piano and literary games.
After the epidemic, under the joint influence of many factors, the consumption concept of the middle class tends to be more cost-effective. "Don't fall into the trap of consumerism" reflects the actual situation of consumption degradation behind the common understanding.
Specific to the duty-free market, with the increase of discounts on platforms such as Tmall flagship store and Tmall International, the invisible benefits of brand counters have increased, and consumers' reasons for buying products from duty-free shops have weakened. Tax-free channels are being forgotten.
Take Tmall International, for example, consumers who have previously offered to buy air tickets to Hainan in Flying Pig will automatically receive Tmall international shopping subsidies, including full reduction coupons of different amounts, such as 999 minus 120,220 and so on. There is also a slogan of "do not queue up, feel at ease to return, and the price is lower than the tax-free island", which is patronized by more than 100000 tourists every day.
After Tmall's international subsidy, the prices of popular goods in duty-free shops such as Armani, Hermes, Lancome, Shiseido and CPB are lower than those in Hainan duty-free shops. The subsidized price of Coach Coach women's bags can be as low as half that of duty-free shops, and products such as Lancome muscle essence can also reach a 20% discount on the price of duty-free shops, and enjoy a 7-day refund after-sales service, which has naturally become a substitute for middle-class duty-free shops.
In the field of electronic products, the prices and services provided by duty-free shops are no longer competitors to JD.com.
From food and clothing consumption to diversified brand consumption, and then to high consumption, personalized consumption, and finally return to rational consumption, China's consumer market has gone through a complete cycle. Consumers return to the rational superposition channel, and it is difficult for the duty-free market to restore the prosperity of the past.
However, it should also be noted that the middle class is only spending more carefully, not that it has no money to spend.
Household deposits climbed to 120.34 trillion yuan by the end of 2022 and increased by 16.67 trillion yuan in 2023, according to data released by the people's Bank of China. Based on the size of China's 1.4 billion population, this means that the average person's savings have increased by about 12000 yuan in a year. In short, the epidemic has not only fostered the habit of consumers to be cautious about spending money, but also made it a habit for residents to save money.
On the other hand, the huge deposit scale of 16.67 trillion yuan also proves the huge potential of China's consumer market. If part of it can be converted into purchasing power, it will bring a lot of incremental demand to the current consumer market.
For the Chinese market, the important premise of turning savings into consumption is to change consumer expectations. After all, once people expect their income to go up, they don't have to be so uptight about spending money. It just takes a while to really change people's income expectations for the future.
From the perspective of channel competition, behind the vigorous promotion of e-commerce is essentially a response to the intensification of the internal volume when the consumer market is transformed from an incremental market to a stock market. Once consumer expectations have improved and savings have been converted into consumption, various channels will no longer have to be so involved, and the competitive environment of the tax-free industry will improve accordingly.
Continue to attract international consumers
The incremental market that can not be ignored in China's duty-free industry.
From a policy point of view, Hainan customs closure may attract more international consumers and expand the volume of the duty-free market.
The so-called customs closure refers to the establishment of a special area supervised by customs on the whole island, in which a high degree of "freedom" will be achieved. That is, by 2035, we will fully realize free and convenient trade, free and convenient investment, free and convenient cross-border capital flows, free and convenient entry and exit of people, free and convenient transportation, and safe and orderly flow of data.
In fact, the most intuitive manifestation is that foreign goods entering and leaving Hainan do not need to pay customs duties, and goods entering the mainland from Hainan need to collect corresponding taxes and be included in trade statistics. At present, the plan of Hainan Province is to realize the customs closure operation of the whole island by the end of 2025 and move forward to a real international free trade port.
Of course, after the customs closure in Hainan, the attractiveness of duty-free shops to small customers is indeed declining. After all, after the island's goods are duty-free, there is no need to go to duty-free shops to buy small goods.
But on the whole, the impact of Hainan customs closure on duty-free shops still far outweighs the disadvantages.
First of all, only operators with duty-free licenses enjoy the policy of free tariff, consumption tax and value-added tax. For tourists, it is more cost-effective to go to duty-free shops only from the point of view of the price. Hainan's "duty-free shops everywhere" is indeed a bit of an exaggeration.
Second, although it is more convenient for tourists to buy small goods from local retailers, if the total value of goods purchased in non-duty-free shops exceeds 5000 yuan when they are brought out of the island, they also need to pay customs duties. On the contrary, Hainan's tax exemption on outlying islands is as high as 100000 yuan. For consumers who buy cosmetics, tobacco and alcohol, most of them will still go to duty-free shops.
According to data released by Haikou Customs, in 2023, Haikou Customs supervised a total of 43.76 billion yuan in duty-free shopping on outlying islands, an increase of 25.4 percent over the same period last year; the number of shoppers was 6.756 million, up 59.9 percent; and the number of shopping items was 51.3 million, an increase of 3.8 percent. According to the calculation, the per capita shopping amount is 6478 yuan, which can be seen that customs clearance and tax exemption alone is difficult to meet the shopping needs of most passengers.
After the customs closure of Hainan, attracting a large number of tourists undoubtedly plays a positive role in the development of the duty-free industry, and the arrival of international consumers will also become a broad incremental market for China's duty-free industry.
Chinese luxury goods change cages for birds
China exemption needs to rely more on the rise of domestic brands.
Looking back at history, the Chinese advocating overseas brands is a choice made by the group under a specific historical background.
Started after the founding of the people's Republic of China, experienced decades of twists and turns, strictly speaking, until the eighties of the last centurySpinthewheeltowinrealmoneynodepositThe industrialization of our country has just begun to get on the right track.
Industrial production has just begun, and the quality of Volkswagen products that can be produced is naturally worrying. At that time, self-developed cars were even of different lengths, not to mention consumer goods for residents.
At that time, there was a background of the times, and there was a shortage of materials.
There is an unconfirmed folk joke that in the early 1980s, state-run hotels around Beijing and Tianjin often put up warning signs that they did not beat customers for no reason. This sentence should seem very incredible to young people today, but it is also the absurdity of history. As for the reason, in fact, it is very simple. In that era of limited supply, sellers were more powerful, and even salespeople with the right to sell goods were the envy of most people at that time.
In this context, manufacturers naturally do not care too much about the quality of the products themselves. After all, there are too many people and the supply of goods is very limited. It is enough just to sell goods to people who can afford them. This is why for a long time in the past, Chinese consumers subconsciously had the idea that "foreign goods equals good quality".
It still takes time for Chinese luxury goods to mature.
However, the vicissitudes of life over the past few decades have completely changed the supply and demand pattern of China's consumer market. Today, the population has reached an inflection point, and major brands strive to fight in the extremely internal stock market. Domestic brands are no longer the domestic brands of decades ago, and product quality is no longer the core of consumers' choice. it's just the basis of competition.
Even domestic cars, which were once the least liked by consumers, are now on a par with joint venture brands in the domestic market. Chery can even become a car for the president of Brazil in overseas markets, and its price is much higher than that at home. It fully reflects that there is little difference between China and foreign countries in terms of product quality.
Throughout history, Chinese exquisite goods have always been important trading objects for overseas businessmen. Silk and paper industry in the Tang Dynasty, porcelain and tea in the Song Dynasty, and high-end spirits in modern times all enjoy a good reputation.
Perhaps, when Chinese brands and Chinese goods come back to history again, we will see tourists from overseas snapping up Chinese goods. By then, the logic of China's duty-free industry, including China's luxury industry, will be completely sublimated, and of course it will be a long process.