Guotai Haitong: Tax-free shopping in the city is still in the early stages, and the expansion of policies and the recovery of inbound tourist flow will lay the foundation for growth.

Guotai Haitong released a research report stating that the current domestic duty-free market in China is still in the early stages of store expansion, cultivation of consumer habits, and ongoing efforts to make shopping more convenient. The current policies have already completed the initial optimization in terms of sales targets, shopping limits, and online reservations, with potential for further deepening in areas such as shopping processes, delivery efficiency, and category integration with Wuxi Online Offline Communication Information Technology Co., Ltd. The policy dividends are expected to continue to be released. With continuous improvement in brand and product supply, as well as ongoing optimization of the fulfillment chain, the penetration rate of shopping is expected to steadily increase from a low level and transform into substantial new sales, further enhancing the synergistic value of leading companies in terms of brand, supply chain, membership system, and port network. Guotai Haitong's main points are as follows: - Post-pandemic recovery of the global duty-free and travel retail market, South Korean experience validates the mainstream status of domestic duty-free as a mature market. - The global duty-free and travel retail market size has been steadily recovering from the low point in 2020, reaching $74.1 billion by 2024, with expected continued growth from 2025 to 2028. South Korea is one of the most mature markets for domestic duty-free globally, with a mature model of "in-store shopping + airport pickup", where domestic duty-free has long held a core position, with in-store sales accounting for over 70%. In comparison, China's domestic duty-free market is still in the stage of policy expansion and cultivation of consumer habits. With reference to the convenience experiences of duty-free shopping on Hainan Island such as "buy now, pick up now" and "guaranteed pick-up", there is potential for gradual improvement in shopping conversion rates if domestic duty-free continues to optimize in terms of reservations, pick-ups, payments, categories, and integration with Wuxi Online Offline Communication Information Technology Co., Ltd. - The expansion of China's domestic duty-free supply system is accelerating, laying the foundation for growth with policy convenience and the recovery of inbound tourist flows. - After 2024, China's domestic duty-free store supply will consist of existing store inventory, transformation of foreign exchange commodity duty-free stores, and new domestic stores, with major cities such as Guangzhou, Tianjin, Fuzhou, Chengdu, Shenzhen, Xi'an, Wuhan, and Changsha gradually opening new stores. The newly opened stores generally adopt a cooperative model of duty-free operator + local commercial/real estate/tourism/airport resources, with locations mainly in core business districts or mature commercial complexes. At the same time, China's policies such as unilateral visa-free entry, mutual visa exemption agreements, and 240-hour transit visa-free policies continue to expand. In the first half of 2026, mainland residents made 88.02 million outbound trips, a year-on-year increase of 10.5%, and foreign arrivals reached 22.914 million people, a year-on-year increase of 20.4%, providing ample potential customer sources for domestic duty-free shopping. - The long-term space of the domestic duty-free market in China depends on the joint realization of the recovery of outbound tourist flows, the expansion of store supply, the convenience of shopping, and the increase in average customer spending. - The bank estimated that by 2025, the number of qualified outbound travelers would be approximately 47.118 million; assuming a 0.3% utilization rate of in-store and an average customer spending of 1400 yuan, the corresponding national duty-free GMV would be around 20 billion yuan. With the implementation of new domestic duty-free policies, completion of store layout, improved consumer awareness, and optimization of port pickup chains, the bank predicts that the national duty-free GMV in 2026E/2030E is expected to increase to approximately 15.5/102.7 billion yuan; sensitivity analysis shows that with unchanged qualified outbound traveler flows in 2035E, utilization rates of 8%-18%, and average customer spending in the range of 1500-3000 yuan, the national domestic duty-free market space is estimated to be around 9.37-42.18 billion yuan, demonstrating that industry size is highly elastic to penetration rates and average customer spending. Risks warning: Policy changes; outbound tourism falls short of expectations; residents' consumption willingness falls short of expectations.