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TR places Essay

(1)Future opportunities: aircraft digital realm
-growing number of airlines. –> how to cooperate with all the airlines? -From 2006, it was estimated that air traveler will grow 6.2% per year in the next 20 years. -Wi-Fi installation (ubiquitous connectivity)+BYOD (97% of passengers) (2)In-flight shoppers’ characteristics:

-their main value: brand product with great deal
-same as non-in-flight passenger, they pursue convenience (i.e. reduce shopping time, saving physical effort, saving of aggravation) and variety-seeking.–>not that important when thinking about marketing strategy. -with short communication–> how to present completely information about product? 82% passengers tend to read duty-free magazines in flight; 37% for filling in time and 25% want to see what’s available, searching for some exclusive product.

Some airline add more crew to sale in flight, for example, Cathay Pacific estimates the sales of duty-free in-flight increases 20% every year. -older & earn more money people are the main purchaser, though there are more younger passengers take air travel. -they are brand conscious, price conscious (40% passengers buy things in-flight for duty-free reason, and 22% think they can get cheaper price in-flight than domestic shops.), and les risk perceptive. However, since there are often well-known band product sold in flight, they tend to worry less about the quality of product. Regarding prices, 46% passengers spend no more than euro 50 dollars, and 39% spend between euro 51 to 100 dollars.–>how to do pricing? -has positive attitude toward advertising.

– alcohol and cosmetics remain the dominant items of sales, 63% buy duty-free for their families and themselves.–>people you care; treat yourself reason. -most of passengers seem time on the plane is their leisure time. (3)Reasons for why they purchase:

Passengers types: Arrivals, Transfers, Locals (will show in different area) Flow-management should be concerned when do marketing planning. passengers care about relaxing and low load atmosphere (light, layout, design of the travel retails, promotion, customer services…), they go to airport to “travelling” reason but not “purchasing. 52% think atmosphere is important, and 38% admit that they are affected by the amount of people in the shops. now 33.5% think waiting areas are too crowded, but still 27% think relaxing. (different airport ) Areas: pre-boarding areas, walkthroughs…

-more crowded, less buying; cleaner and more open, more buying. Customers’ dwelling time is a significant issue.–> how to activate the impulse purchasing?

Atmosphere–> traveling feeling (Ads, commercials, layouts) + people density (F&B, spa) + exclusive or customized product (gift) + services (make-up) + special promotion (festival) + enough information (IT)…premise is they have “time”, if not, try to activate them do purchasing in flight

Constraint: the availability of material concerning the duty-free market.–>hoe to build Internet platform? Idea: LANCOME, your journey companion. treat yourself and who you care about; choose one kind of fragrance to memorize the journey. change the ads. new customers develop–men, business men who can’t travel with their love this time, as a promising symbol “I think about you during travel, and hopefully we can go out together next time” . LANCOME, as a symbol for “love- love yourself and people you care ” and “passion-passion for travel” (red rose) Dubai duty-free: No.1 revenue in the world; for 28yrs existence; the largest airport retail operation in the world. special promotions (ex. lottery for luxury car). Chinese traveler: Kwan_Siu Lan.pdf

DOWNTOWN DUTY-Free SHOP Duty-free shops (or stores) are retail outlets that are exempt from the payment of certain local or national taxes and duties, on the requirement that the goods sold will be sold to travelers who will take them out of the country. Which products can be sold duty-free vary by jurisdiction, as well as how they can be sold, and the process of calculating the duty or refund the duty component. However, some countries impose duty on goods brought into the country, though they had been bought duty-free in another country, or when the value or quantity of such goods exceed an allowed limit. Duty-free shops are often found in the international zone of international airports, sea ports, and train stations but goods can be also bought duty-free on board airplanes and passenger ships.

They are not as commonly available for road or train travelers, although several border crossings between the United States and both Canada and Mexico have duty-free shops for car travelers. In some countries, any shop can participate in a reimbursement system, such as Global Blue where a sum equivalent to the tax is paid, but then the goods are presented to the customs and the sum reimbursed on exit. These outlets were abolished for intra-EU travellers in 1999, but are retained for travelers whose final destination is outside the EU.

They also sell to intra-EU travelers but with appropriate taxes. Some special member state territories such as Åland,Livigno and the Canary Islands, are within the EU but outside the EU tax union, and thus still continue duty-free sales for all travelers. Tax Free World Association (TFWA) announced that in 2011 Asia-Pacific, with 35 percent of global duty-free and travel retail sales, beat Europe and Americas, with these regions accounting for 34 percent and 23 percent respectively. 31 percent of sales came from the fragrances and cosmetics category, followed by the wine and spirit category with 17 percent and then comes tobacco products.[1]

Duty-free shopping away from ports

Some duty-free shops operate in central business districts away from airports or other ports. In Japan, for example, any visitor whose passport indicates that they have been in the country for less than six months can buy duty-free items. Duty-free shops are also a mainstay in the Akihabara electronic shopping district of Tokyo. In Thailand, the King Power chain has shops where duty-free items are pre-purchased and delivered separately to the airport to be picked up on departure. For certain other purchases, a VAT refund may be claimed at the airport upon departure.[8] In the Philippines, there is one shopping mall called the Duty Free Philippines Fiestamall, which is located a few miles away from Ninoy Aquino Airport as opposed to being at the airport itself. It is the only shopping mall of its kind in the world. The goods that are sold in this mall are often imported products which come from around the world (mainly from USA, Asia andAustralasia) and are not found in any other shopping malls in the country, aside from duty-free malls.

Tourists, visitors and returning citizens of Philippines often pay a visit to this mall shortly after their arrival (since only arriving passengers and their companions are allowed access).[9] In order to gain entry, a passport is needed to be presented and registered at the Customer Registration Counter at the entrance of the mall. The customer will then be issued a shopping card; these shopping cards must be presented to the cashier for validation of purchases. Arriving customers are given a certain tax-free allowance on purchases and anything in excess will be subject to local and national taxes. In the past, the mall used to only accept US dollars and Philippine peso but in recent years, it had begun accepting other currencies such as Japanese yen, Brunei dollar,Australian dollar, British pound, Canadian dollar, Swiss franc, Saudi riyal, Bahraini dinar, and Thai baht.

Currency exchange booths are also available inside the mall if a customer wishes to exchange currencies into Philippine pesos or US dollars. Credits cards can also be used for purchasing goods.[10] In Australia, duty-free shops have all but disappeared after the introduction of the GST in 2000. Currently, duty-free shops are nearly all located within international airports.

Residents and tourists are now allowed to purchase virtually any physical good within 60 days of departure,[11] which needs to be taken on the outward flight, and claim the GST component back through the Tourist Refund Scheme when passing through customs. Consumers are now free to fully use their items prior to departure. This is in contrast prior to 2000, where all purchases had to be packed by the duty-free store in a sealed clear plastic bag, and could only be broken open by customs staff just prior to departure.

[12] Duty-free outside the airports in the EU

Any traveller living in a country outside the EU VAT area is entitled to shop tax-free at participating shops in the EU. The traveller pays the VAT on goods in the shop in the usual way, and can request a refund when exporting the goods. To qualify, the traveller must: have residency in a non-EU country

have a maximum stay of six months within the EU
make purchases no more than three months prior to export
obtain a form from the shop where he or she makes the purchase present the form, and in certain cases the goods, to a customs officer when leaving the EU, where they will be stamped Only goods meant for personal use are eligible for the refund. The stamped forms and receipts can then be sent back to the retailers, or their agents, for a refund. In most cases, a minimum purchase applies to use the tax-free shopping scheme. The actual amount of VAT reclaimable depends on the VAT rate applicable in the particular country to the goods purchased, and may be subject to a deduction for administration fees.

Security considerations

Travelers on long-haul routes with at least one transit stop between their departure airport and destination airport should be careful to purchase their duty-free alcohol or perfume at the last transit port, as otherwise they may have it confiscated by security when they board at the transit port, as they will be exceeding the current limit on liquids in hand baggage. This does not apply to passengers transferring within the EU, Singapore and Croatia on the same day, as long as the liquid item is sealed in a plastic bag with the receipt showing in the bag. Arrivals duty-free shops are now becoming more common. Most of South and Central America, and the Caribbean have such shops, as does SE Asia and Oceania. Switzerland and Canada are looking to introduce them in 2010, this method of retail removes any security problems for the transit of liquids as they are not carried on aircraft.[13] Several airlines do not allow sales of certain sharp objects in-flight due to security risk. Other objects that have sharp parts, such as model airplanes, may be bought in-flight but received at the passengers’ home address for the same reason.

Inbound duty-free

Some countries, including Australia, Argentina, Brazil, Chile, China, Iceland, India, Jamaica, Kenya, Malaysia, New Zealand, Norway, Panama, the Philippines, Sri Lanka, Switzerland, and Taiwan have inwards duty-free facilities, where arriving passengers can purchase duty-free items immediately before going through customs. This not only saves the inconvenience of having to carry these items around the world but also solves the security problem mentioned above. Other countries such asCanada and Sweden have been considering duty-free on arrival. The European Union does not permit arrivals duty-free stores; some EU airports sell goods on arrival in the baggage claim area described as “Tax-Free”, but these goods are all tax-paid sales, the local sales tax is discounted.

Normally, discounted liquors or tobacco products cannot be bought when arriving into an EU Member State as there is often a high local Excise Duty on these goods as well as the local sales tax (VAT/IVA/TVA) which is included in the price. In some EU Territories the tax on tobaccos and liquors is lower than in other EU countries, which is why the prices still seem competitive and look like duty-free prices. A good example is the difference in tobacco prices between the UK and Ireland, compared to Spain or Portugal.

Legal basis

It is a common feature of most tax systems that taxes are not raised on goods to be exported. To do so would place the goods at a disadvantage to those from other countries. Either the tax system allows the goods to be exported without taxes (stored prior to export in a bonded warehouse), or taxes can be claimed back when they are exported (see VAT). Such exemption also applies to goods supplied for use on ships and aircraft, because they are consumed outside the country. Businesses supplying such goods can do so tax- and duty-free. Goods sold to passengers on board ships or aircraft are tax free. The passenger can either consume them on board, or import them tax-free into the country they are traveling to, so long as they are within the traveler’s duty-free allowance. Most tax regimes also allow travelers entering a country to bring in a certain amount of goods for personal use without paying tax on them, the so-called “duty-free allowance”; because it is not economically justifiable to collect the small amounts of tax involved, and would be an inconvenience to the passengers.

A duty-free shop works under the same system. The goods must be exported intact (they cannot be consumed in the airport), and they are importing into the destination country under that country’s own tax rules. In some countries, in order to ensure that goods are exported intact, they are hand-delivered in a closed bag to the passenger at the gate after his ticket is scanned. In the United States, duty-free shops are technically considered class 9 Bonded Warehouses with regard to the U.S. Customs & Border Protection: Class 9. Bonded warehouse, known as duty-free stores, used for selling, for use outside the Customs territory, conditionally duty-free merchandise owned or sold by the proprietor and delivered from the Class 9 warehouse to an airport or other exit point for exportation by, or on behalf of, individuals departing from the Customs territory for destinations other than foreign trade zones.

Pursuant to 19 U.S.C. 1555(b)(8)(C), Customs territory, for purposes of duty-free stores, means the Customs territory of the U.S. as defined in 101.1(e) of this chapter, and foreign trade zones (see part 146 of this chapter). All distribution warehouses used exclusively to provide individual duty-free sales locations and storage cribs with conditionally duty-free merchandise are also Class 9 warehouses. Moreover, in the U.S. some duty-free stores will sell their goods to domestic passengers with appropriate taxes included. Alcohol and tobacco products are restricted to international passengers only and subject to the age limitations of 21 and 18 respectively, even though the age one must be to import those items into other countries may be lower.

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