Kota Kinabalu: Firefly, a subsidiary of Malaysia Aviation Group Berhad, started its Kota Kinabalu-Hainan route on Jan 14.
Hainan is the ancestral cuisine of China’s southernmost province that had once brought Hainanese food and beverage flavours to Southeast Asia.
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Gone are the pre-Covid-19 days when many tourists from China descended on shops in Kota Kinabalu to buy up luxury brand watches and other valuable branded goods, as these shoppers now can buy them off their government’s declared tax free island of Hainan.
Many of these shoppers were resellers of their scarce purchased items back in China for a profit, as the consumption and VAT tax imposed by the China government for similar items on sale in Mainland China was up to 56 per cent and luxury goods import tax of 60 per cent.
In the years preceding the pandemic, Kota Kinabalu’s luxury goods boutiques were descended upon. These were participants in a complex commercial ecosystem as daigou agents, armed with precise shopping lists, to buy and resell.
Some of these no expense tour groups to Sabah included visits to certain retail outlets here as the itineraries of these China group tours, making shopping almost mandatory so that the tour operators and guides could earn the shopping commissions income to make up for organising the tours expenses.
The arithmetic was irresistible—purchase abroad, resell at home, profit from the differential. Sabah’s retailers, like many across Asia, had tailored their business models accordingly, embedding commission earning shopping stops into tour itineraries that subsidized the entire travel economy through commission structures.
But all-inclusive tours are losing appeal as China’s travellers — especially the younger generation — increasingly venture abroad independently, allowing them to focus more on the local culture and niche brands.
With the expansion of its visa-free policies and a stronger yuan, China has recently designated the southern Hainan province as an island-wide duty-free zone, slashing import duties, value-added tax and consumption tax on most overseas goods entering it.
Even though Chinese tourist numbers are recovering across Asia after a Covid-19 pandemic-era contraction, for foreign shopping destinations outside Mainland China, one thing has not returned: the spending sprees that used to boost duty free retailers around the world.
The digital revolution has further diminished the urgency of overseas purchasing; Chinese e-commerce platforms now offer the same products with seamless efficiency, often at competitive prices.
Catherine Lim, a senior equity analyst at Bloomberg Intelligence, observes that “duty-free conversion rates and spending per capita remain below their pre-2019 peaks” even in Singapore, a premier shopping destination.
Subramania Bhatt of KPMG China Trading Desk characterizes the phenomenon more starkly: “The old model of suitcase shopping and spending by Chinese travellers is structurally weaker.”
A host of social and economic shifts are contributing to the downturn, analysts said. Chinese consumers are cutting back on spending amid an economic slowdown, and young people especially are now more likely to splash out on cultural experiences or unique local products than the kinds of goods found in big duty-free shops.
As Moqian Sun of The Harvest consultancy notes, a new generation has transcended the “duty free equals bargain equals must-buy overseas” mentality; those clinging to outdated assumptions confront permanent contraction.
