In 2018, Tax Free Shopping sales were worth approximately £6.8 billion in 2018 according to tax refunds specialist Planet.
International shoppers spend on average 3.7 more than their domestic counterparts, with some retailers seeing 60% of sales coming from non-EU shoppers, the company told RPA.
The importance of international shoppers is increasing, with the average transaction value of purchases made by tourists in Europe growing by 6% last year compared with the previous year.
However, the UK market needs to work harder to attract international shoppers to its shores, said Planet. In 2017, 337,000 Chinese tourists visited the UK (Source: VisitBritain). By contrast, 432,000 visited Finland (Source: Visit Finland). The fact that Finland, with a population only 68% that of London, attracts more Chinese shoppers than the whole of the UK is illustrative of the performance gap.
Of the 37 million tourists to the UK in 2018, 13 million were from non-EU nations, and therefore Tax Free eligible, nations. But there were 24 million arrivals from EU nations; potentially equating to a 187% rise in the current number of eligible Tax Free Shopping tourists to the UK.
This additional volume of Tax Free shoppers could be worth an estimated £1.4 billion for UK retailers, according to New West End Company.
Conversely, of the 200 million tourists to the remaining 27 EU countries in 2018, 138 million were from non-EU nations, and therefore Tax Free eligible nations, with 62 million arrivals from the UK; potentially equating to a 45% increase in the current number of eligible Tax Free Shopping tourists to the EU.
RPA Perspective The start of the year saw a modest lift in Tax Free shopping sales, increasing 1% year-on-year in January 2019. This marks the fourth consecutive month of growth, mirroring the 1% growth registered in in January 2018.
Markets in Germany and Spain have been the main contributors to the tepid growth this month. Spain saw a drop in the average transaction value (ATV) of its international shoppers, causing a sales decline of 3%. Sales in Germany dropped by 11%, partly as a result of a decrease in the overall number of transactions.
But against all odds, France posted 5% year-on-year growth. This will be welcomed by many retailers who have suffered after two consecutive months of decline, likely driven by the effects of the political ‘Gilets Jaunes’ protests, said Planet.
The outlook for arrival numbers for the first quarter of 2019 is modest but positive, with a predicted 1% increase. Most European countries will experience growth, with the exception of France, which can expect a 3% year-on-year decline.
The company also highlighted Indian shoppers. It said:
“We have seen a considerable increase in Tax Free sales to Indian tourists over the past few years, which is unsurprising considering the sustained boom of the emerging economy, and India being the world’s largest democracy with a population of 1.3 billion people. The country boasts the eleventh-highest number of high-net worth individuals (HNWI), the fastest growing in the world in terms of HNWI population expansion in 2017.
The country ranks eleventh for its amount of millionaires and third for its number of billionaires. Tax Free shopping spend by Indian shoppers has gone from strength to strength, posting double-digit growth four years in a row. Growth only slowed to 5.9% last year as a result of a weakened rupee-euro rate.”
