Removal of tax-free shopping takes shine off UK as luxury shopping destination

This article is brought to you by Retail Technology Review: Removal of tax-free shopping takes shine off UK as luxury shopping destination.

The removal of tax-free shopping in the UK is set to impact the travel and purchasing decisions of international shopping tourists after the end of COVID-related travel restrictions, the latest data from ESW (formerly eShopWorld) reveals.

ESW’s ‘Global Voices: Pre-Peak Pulse 2021’ survey of almost 15,000 consumers across fourteen countries revealed the impact the removal of tax-free shopping, which came into effect on 1 January 2021, is set to have, with over four in ten (46%) luxury shoppers indicating they will make fewer visits to the UK and spend less money with UK brands as a consequence of the duty-free perk being scrapped.

A further 43% say the move removes a competitive advantage for the UK’s luxury sector and nearly half (46%) say they will prioritise travel to other shopping destinations that offer tax-free shopping over the UK when making holiday plans.

Ahead of the start of China’s National Day Golden Week next month, during which large number of Chinese visitors traditionally travel to the UK to celebrate and shop, the research reveals the impact is even more marked.  Six in ten (59%) of Chinese respondents say following the removal of tax-free shopping, they will make fewer visits to Britain and nearly two thirds (64%) say they will spend less on British brands once travel restrictions are lifted.

Bain & Company predict 48% of global luxury spending will come from China by 2025.  However, that spend is being repatriated away from global shopping locations with 70% of China’s luxury purchases now being completed at home1.  This is indicative of a structural shift in the luxury industry, with ESW data revealing luxury goods were the fastest growing cross-border ecommerce category in the first half of 2021.

44% of respondents who had previously travelled abroad to shop indicated they would resume taking international shopping holidays once fully vaccinated, with over two-fifths (41%) saying they would shop online as well as travel internationally to purchase.  25% of respondents who identified as ‘shopping tourists’ indicated they would no longer take international shopping holidays.

Martim Avillez Oliveira, Chief Commercial Officer, EMEA and APAC at ESW, commented: “The events of past twenty-one months have shown retail and luxury brands need to mitigate risks, diversify and balance their distribution to thrive.  With international travel not expected to return to pre-pandemic levels before 2023 or 2024, brands need to find alternative routes to those highest value shoppers, who have a passion for British luxury and heritage brands and want to engage with and buy directly from brands.”

“For those brands that don’t have the digital capabilities, expertise or capital required to fully leverage direct to consumer opportunities, ESW offers a seamless end-to-end solution that helps brands capitalise on this golden era for direct-to-consumer ecommerce."

Brands partnering with ESW can enter new international markets in a matter of weeks, many times faster than if they attempted to do so on their own – all while engaging directly with customers and retaining ownership of all the data collected during the shopping process.

Methodology:

ESW’s latest consumer survey was fielded from 14,697 consumers in 14 countries (UK, France, Germany, US, Canada, Mexico, South Africa, UAE, India, Russia, China, South Korea, Japan and Australia), who were surveyed online in July 2021.