Asia Pacific is continuing to act as a global growth engine for the A number of countries offer VAT/GST refunds to international... More (TFS) Industry. Greg Gelhaus, Global Blue’s Head of Asia Pacific, provides an update on this year’s TFS performance and some of the key trends which defined the last 12 months across the Asia Pacific Region.
Against 2017 exceptional TFS performance, has the region managed to sustain these results in 2018?
Overall TFS SiS refers to the total spend by Globe Shoppers for a given ... More (SIS) continued to expand in the APAC region in 2018 on the back of strong tourism arrival growth within the region. For the nine months ending September 2018, SIS has grown +18% versus the same period in 2017, while overall transactions have grown +20%. We have now seen the overall region achieve positive TFS SIS growth for the past 23 consecutive months, starting in November 2016.
At a country level, Japan remains the region’s TFS hotspot despite the recent natural disasters, which have impacted tourism in certain areas of the country during the Summer season. For the nine months ending September 2018, TFS SIS has grown by +40% with transactions increasing by +32%. Chinese are the major drivers of this performance, increasing their TFS SIS by +51% compared to 2017. Today, Chinese globe shoppers are responsible for three-quarters of the total TFS spend in Japan.
In parallel, the Korean TFS market is showing signs of recovery after China has relaxed its travel ban to Korea, which was implemented in protest to Korea’s decision to install the THAAD missile defence system. With this positive development in 2018, Chinese globe shoppers now represent 64% of total TFS spend in the country and have helped to deliver positive TFS results in Korea this year – including +13% growth in TFS SIS and a +14% growth in TFS transactions.
Japan’s and Korea’s performances have helped to counterbalance Singapore’s slower results in 2018. In Singapore, less favourable exchange rates have impacted spending from two of Singapore’s largest TFS nationalities, Indonesians and Malaysians. While Indonesians remain Singapore’s second largest TFS nationality, their SIS has decreased by -8% compared to 2017. Similarly, Malaysians are still the #3 TFS nationality in Singapore, yet their SIS has decreased by -9% compared to 2017.
In terms of nationalities, Chinese globe shoppers continue to drive the majority of the TFS activity in the region, having grown 31% in terms of SIS and 35% in terms of transactions in the first nine months of 2018 versus the same period in the prior year. Chinese travellers now account for 63% of total TFS spend across the APAC region, with Refers to average value of a transaction (usually applying t... More per TFS transaction of €532. In addition, we have seen strong growth from Korean globe shoppers, posting a +12% increase of their SIS and +11% in terms of transactions. With the continued growth of the overall TFS industry across APAC, retailers who have remained focused on globe shoppers have seen the continued benefits offered by this unique group of consumers. Throughout this report, we will explore in detail the key factors and trends that have impacted A number of countries offer VAT/GST refunds to international... More in Asia Pacific in 2018.
What are the emerging nationalities and trends that you think are worth mentioning?
This year, the surprise performance comes from Vietnamese. While these customers only represent 2% of total TFS spend in the region, their TFS spend is showing a +10% progression in terms of TFS SIS. After Cambodians and Malaysians, Vietnamese are the third heaviest spender in the region at €606 per transaction. It will be important for retailers to be prepared to cater to this emerging TFS nationality going forward.
A major trend witnessed in Asia Pacific has been the growth of Millennials TFS spending. In Japan and Singapore, out of all age groups analysed, Millennials represent the largest cohort of globe shoppers at 49% and 36% of overall country SIS, respectively. When combined, millennial globe shoppers in Singapore and Japan have seen their TFS spend progress by +41%.
Another trend to consider is the growing interest in experiential tourism, which is starting to impact travel destinations. For example, in Japan, while Tokyo still holds onto the lion’s share of TFS spending, new TFS hotspots are starting to emerge, as globe shoppers look to combine their TFS shopping with experiencing other areas of the Country. Government statistics report that Okinawa has seen foreign tourists’ spending increase +84%, followed by Sapporo at +26% and Fukuoka at +15%.
A further trend that we have witnessed is the growing importance of Elite and Frequent shoppers in the region. As highlighted in the charts to the left for Singapore and Korea, these globe shoppers are clear contributors to these top markets’ TFS performance. In Singapore for example, although Elite and Frequent shoppers combined only represent 17% of total globe shoppers, they make up more than half of the country’s TFS total spend from October 2017 to September 2018. This is very similar to Korea where Elite and Frequent shoppers combined only amount to 16% of total globe shoppers in the country but are responsible for nearly half of total TFS spend in the country. Given this trend, it will be important for merchants to consider how to grow their relationships with these high spending and habitual TFS customers. Global Blue, through its portfolio of products and services, can help our partners to focus their resources on the right customers, at the right time.
What are your priorities for 2019?
The Asia Pacific region now accounts for approximately one-third of Global Blue’s transactions worldwide. As regional tourism growth continues to outstrip that of Europe, Asia Pacific’s share of global TFS activity will continue to grow. We should consider that there are still many countries within Asia Pacific that do not currently operate TFS schemes and we expect to see several of these countries launching A number of countries offer VAT/GST refunds to international... More over the coming years, further expanding our industry’s footprint.
In this favourable context, we will continue to strongly support our partners to capture these growth opportunities. This includes continuing to work with our clients to enhance the TFS shopping experience for their globe shoppers through our innovative solutions such as our IC2 suite of issuing solutions, MCC, our varied refunding solutions in-store and at our refund points and through our best-in-class Intelligence and Marketing services.