India Travel Retail Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

India Travel Retail Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Travel Retail is the next great frontier of the Indian Retail Sector. As people's incomes rise, India's position as a business powerhouse and tourist destination will also continue to solidify, leading to the growth and prosperity of this industry. India's Travel Retail Market is Poised to Grow at a CAGR of greater than 12% by 2027.

A combination of a large and growing population, increasing air connectivity, inbound tourism, and the growing disposable incomes and propensity to travel internationally by India's middle class are some of the major factors fuelling the growth of India's travel retail market.

As per research, it is estimated that nearly 80% of the country's duty-free shoppers are Indians which is quite unlike other markets in the region, such as Korea or Thailand, where most duty-free sales are from international travelers rather than local travelers. However, this is likely to change with the growth in international tourism in the country. While India accounts for only 10.7% of the Asia Pacific region's total international tourist arrivals, its year-on-year growth rate has been well above the region's average in recent years. As of 2020, India attracted nearly 6.3 million international tourists. The changes by the Indian Government to its e-visa regime are simplifying procedures, making it friendlier to international tourists. These developments will further help in the growth of India's travel retail market.

The growth of e-commerce can be seen as part of a broader digitalization of the travel industry In India, especially airports. This is in part due to younger profiles of travelers, the growth of low-cost airlines, and airport privatization. The Introduction of Goods and Service Tax (GST) has decreased the cost and time of logistics and interstate transport, making the Indian retail market more lucrative for foreign investors who can invest in single brands, multi brands, wholesale/ cash, carry, e-commerce, and duty-free.

COVID-19 has all but wiped out the travel industry in India, and the passenger numbers continue to be affected in India even in 2021, owing to existing lockdowns and restrictions in the wake of the second wave of the pandemic. In 2020, less than 7 million foreign tourists visited India, with a dip of around 65% compared to 2019 due to imposed travel restrictions. The COVID-19 outbreak is impacting duty-free shopping behavior, spending, and browsing likelihood on a category level, particularly with luxury items in India. As a result of the pandemic, shoppers have moved to online shopping in greater swathes than before, and several travel retail operators, including Delhi Duty-Free, have introduced new online retail services facilitating home delivery of travel retail exclusive and duty-absorbed products.

Nearly 50% of an international airport's revenue is generated from duty-free and travel retail activities. In terms of sheer size and range offered, the duty-free retail areas at Indira Gandhi International Airport in Delhi and Chhatrapati Shivaji International Airport in Mumbai are nothing less than high-end malls.​ The largest duty-free area in India is currently operated by Mumbai Duty-Free at Mumbai International Airport Limited (MIAL), followed by New Delhi International Airport Limited (DIAL), which is operated by New Delhi Duty-Free Services (DDFS). The duty-free revenue per passenger for New Delhi and Mumbai was the highest in India at USD 10 and 11 per passenger for FY2022.

Data, omnichannel, and personalization define the future of airport retail. Online pre-purchase orders for airport pickup are more popular in the Indian market than anywhere else in the Asia Pacific region. There is a growing response by duty-free operators to the increasingly flexible payment, ordering pickup, and delivery needs of customers. Delhi Duty-Free's 'Shop and Collect' plan, for instance, offers an extra 10% discount to those who pre-book orders at the airport on their outbound journey and pick them upon return.

Perfumes, liquor, and tobacco are the top three bestselling categories in duty-free stores in India; however, wines and spirits remain the highest on the to-buy list. Liquor is the key category of sales at these stores, with an increasing number of young Indians moving towards single malts and premium white spirits. Deluxe Scotch remains the biggest category and contributes significantly to the growth of the liquor business. Similarly, the cosmetics category is witnessing high growth as more women travel abroad for work and leisure.

Apart from the product variety offered at the duty-free stores, the promotional and other offers attract Indian consumers. For instance, two bottles of Johnny Walker Black Label cost around INR 4700 (USD 54) at the Delhi Duty-Free. Many consumers also prefer buying cosmetics at the Delhi Duty-Free store as they are nearly 20% cheaper.

Furthermore, the duty-free shops in India at airport arrivals do more business than their peers at departure, and the highest-selling category in arrivals has been liquor. This is primarily because the prices offered on liquor at duty-free shops are extremely competitive. In fact, arrivals account for the lion’s share of the business at duty-free shops as inbound travelers like to pick up items on their way back to the city.

The Indian travel retail market is highly competitive, with several international and domestic brands present in the market, including Dufry, Lotte, The Shilla, Delhi Duty-Free, and Flemigo Travel Retail. These stores are increasingly attracting buyers with their exciting range and offer; however, at the same time, the shopping experience is important too, and it is something that the duty-free stores in India need to work on, especially with luxury products.

• The market estimate (ME) sheet in Excel format
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