With the summer holiday season underway, many UK travellers will be taking advantage of ‘tax free’ shopping at the airport. More than half (59%) of UK consumers believe that ‘tax free’ airport stores offer average savings of 20% or more compared to recommended retail prices on the high street, but a new report released today by shopping comparison website Kelkoo, reveals that departure lounge retailers may not be offering the bargains shoppers expect…
With the summer holiday season underway, many UK travellers will be taking advantage of ‘tax free’ shopping at the airport. More than half (59%) of UK consumers believe that ‘tax free’ airport stores offer average savings of 20% or more compared to recommended retail prices on the high street, but a new report released today by shopping comparison website Kelkoo, reveals that departure lounge retailers may not be offering the bargains shoppers expect. Contrary to popular belief, ‘tax free’ goods in European airports are on average just 6.2% cheaper than those in local high street stores, with Heathrow offering the worst overall discounts out of any major European airport (3.1%).
Tax free shopping is big business for European airports, with consumers spending over £2.5 billion last year alone, making savings of 6.2% (£168 million) compared to standard high street prices. However, by shopping online for the same goods, consumers could have saved a further 6.1% (£156 million) – which would have equated to a total saving of 12% ( £324 million) over high street stores.
Today’s report, commissioned by Kelkoo, and produced by the Centre for Retail Research, examines the difference in prices between high street stores, ‘tax free’ shops in airports and online retailers across Europe. The study focuses on tax free shopping (free of VAT) for travellers whose journeys start and end within the EU, rather than duty free shopping (free of VAT and excise duty), which was abolished in 1999 by EU member states and is now only available to travellers starting or ending their journey outside the EU. A mystery shopping exercise was carried out for a representative basket of 22 products with a strong pan-European sales footprint, spanning five key categories (health & beauty; luxury, fashion & electricals; wines & spirits; tobacco; fine foods & confectionary), and prices were gathered from European airport ‘tax free’ retail outlets and online retailers. These prices were then benchmarked against the average RRP in local high street stores. The ten airports selected for the purpose of the study represent a sample of European countries and accounted for 80% of European passenger traffic in 2009.
Bruce Fair, Managing Director of Kelkoo UK , comments : "Airports create the perfect environment for shopping, as people have time to kill, a holiday feel-good-factor, and extra cash in their pockets. However, they don’t always create the most competitive environment for prices, and eleven years on from the end of ‘duty-free’ there is still the perception that tax free shopping offers the best deals. In reality, higher overheads, decreased competition and less choice means that ‘tax free’ shops are not always the hunting ground for bargains that people think they are. In fact, airside retailers simply cannot compete with online retail for the best prices."
Europe ‘s most expensive airports
For people who like to shop before they fly, the discounts on offer across European airports vary widely. Heathrow offers the worst average tax free savings in Europe at just 3.1%, followed by Berlin Schoenefeld at 4.6%, while Gatwick ranks fifth with below average savings of 5%. In contrast, Lyon St Exupery offers the highest average tax free savings at 11.9%, closely followed by Charles de Gaulle, Paris (11.5%). British airport retailers are the most expensive for luxury, fashion & electrical goods, whilst Spanish airport stores have the highest prices for health and beauty products, and wines and spirits are dearest in French airports.
Table 1: Discounts offered by Europe’s top ten airports on tax free prices vs. the high street
Prices for individual items can also vary significantly across airports in Europe. For example, an Apple iPad can cost anything from £556 in Rome to £579 in the UK. In contrast, Estee Lauder Advanced Night repair is just £46 at Gatwick, whereas in France you can expect to pay almost double at £90.
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Is airport shopping really tax free?
Using the high street prices in each country as the basis for comparison, the report reveals that European airports offer ‘tax free’ savings of 6.2% on average. However, taking the average standard rate of VAT in Europe, if airport ‘tax free’ stores were passing on a full tax rebate on the high street cost of goods to European travellers, they would instead be offering average price reductions of 17.4% across Europe, and 14.9% in the UK based on the country’s current standard rate of VAT. Airport retailers argue that this discrepancy is due to higher overheads, including steep rental charges and higher staff salaries, compared to those of high street stores.
Surf before you fly for the best prices
Almost 6 in 10 consumers (59%) in the UK believe that ‘tax free’ airport stores offer average savings of 20% or more on recommended retail prices, and one in five (20%) intentionally wait to shop there before travelling. Almost one in ten also think airport shops are cheaper than online retailers, and over two thirds of UK shoppers (64%) often buy themselves a treat at the airport even if they don’t need it.
Although prices in airport ‘tax free’ shops still compare favourably to the local high street, with discounts varying from 3.1% to 11.9%, online savings on the same goods are much higher, ranging from 9.1% to 15.4%. The UK (15.4%) and France (13.7%) offer the best overall savings for online shopping over high street stores, with Spain and Italy ranking bottom, although internet goods in these countries are still on average 9% cheaper than those on the high street.
70% of tax free retail sales in Europe are comprised of health & beauty products (39%) and luxury, fashion & electricals items (31%). While Europe’s airport ‘tax free’ outlets offer savings against high street prices in these categories ranging from 6% to 10%, online discounts are higher at 12% and 13% respectively. In fact, Europe’s online retailers offer consistently higher savings on all categories except for tobacco.
Bruce Fair concludes: "It is evident that ‘tax free’ shops no longer offer the most competitive prices in Europe. Although the two largest tax free sectors, namely health & beauty, and luxury, fashion & electricals, still offer the captive airport shopper positive savings against high street prices ranging from 6% to 10% on average, buying the same goods from online retailers can save consumers 12% and 13% respectively. Our advice to travellers who want the best deal is to shop online before they fly."
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
