After holding a prominent position throughout 2022, the UK has dropped to its lowest ranking in 12 months for consumer spending on Tax Free products in Europe, according to new findings from Planet, a global technology company that provides integrated software, payment, and technology solutions.
Planet’s latest Intelligence report shows the UK has dropped down to fifth place behind the US, Taiwan, Republic of Korea and China in terms of Tax Free shopping in Europe. The competition between American and Asian consumers is escalating as the potential for a booming Chinese tourist market in 2023 becomes increasingly evident.
Over the last twelve months, the significance of US consumers for Europe’s retailers has been constant but in recent months, there has been a shift in the sales ratio between Asian consumers, particularly after the easing of COVID restrictions in China and the Chinese New Year.
This shift has resulted in a decrease in the dominance of US tourists, who now make up just 15 per cent of the European Tax Free market, with Taiwan and China now making up 5.5 per cent and 4.5 per cent of the market, respectively, increasing from 3.4 per cent and 4.0 per cent in December 2022.
Elsewhere, Swiss tourists have re-entered the top 10 ranking after several months of absence, rising due to an increase of shoppers in Germany.
UK continues to miss out on full US consumer spending power
The data also shows how fashion capitals of Europe have been benefiting from increased spending from US tourists. Comparing the average spending of returning multi-destination US tourists in 2019 across the major fashion capitals of Europe (London, Paris, Milan, Madrid, and Berlin), the analysis shows US tourists have been increasing their spending, with the average spend per tourist rising by 23 per cent from €1,715 in 2019 to €2,110 in 2022/23.
This increase in average spending is accompanied by an increase in the upper whisker of the data, which indicates that some tourists are spending significantly more than the average compared to their 2019 spend.
However, London is not fully benefiting from this increase in spending as it currently lacks a Tax Free shopping scheme to attract high spending tourists. In 2019, the average spend per US tourist in London was £1,048, compared to the other European fashion capitals having an average spend of €1,715.
It is difficult to determine the exact impact of the discontinuation of the UK Tax Free shopping scheme on London and the other European fashion capitals, as it is influenced by various social and economic factors such as exchange rates and price promotions. However, the data does highlight the potential level of spending that US tourists could unleash in the UK, as the largest generator of Tax Free sales in Europe, if a scheme were to become available.
Luca Cassina, President of Retail at Planet commented:
“It’s not just the full spending power of US visitors that UK retailers are missing out on due to a lack of a digital Tax Free shopping scheme, but high spending Chinese tourists too.
“We know from our previous research that almost 7 out of 10 Chinese consumers would be more likely to visit the UK if a Tax Free shopping scheme were to be available, providing a much-needed boost to the economy by generating tax income for the UK Government on those goods and services which attract VAT.
“European retailers continue to reap the rewards of Tax Free shopping and we implore the UK to follow suit to offer visitors to Europe more options over where they choose to shop Tax Free.”
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