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Removal of tax-free shopping dents appeal of UK as luxury shopping destination

Tom Bottomley
27 September 2021

A huge 46% of luxury shoppers say they will make fewer visits to the UK and spend less money with UK brands as a consequence of the removal of tax-free shopping in the UK, new data from cross-border ecommerce leader ESW has revealed.

ESW’s "Global Voices: Pre-Peak Pulse 2021" survey took responses from almost 15,000 consumers across fourteen countries to reveal the true impact of the removal of tax-free shopping, which came into effect on 1 January, 2021.

A quarter (25%) of international “shopping tourists” say they will shop online rather than travel abroad to purchase.

A further 43% of those surveyed said the move removes a competitive advantage for the UK’s luxury sector, and nearly half (46%) say they will prioritise travel to other shopping destinations that offer tax-free shopping over the UK when making holiday plans.

Ahead of the start of China’s National Day Golden Week next month, during which large number of Chinese visitors traditionally travel to the UK to celebrate and shop, the research reveals the impact is even more marked. Six in ten (59%) of Chinese respondents say following the removal of tax-free shopping, they will make fewer visits to Britain and nearly two thirds (64%) say they will spend less on British brands once travel restrictions are lifted.

Global management consulting firm Bain & Company predicts 48% of global luxury spending will come from China by 2025. However, that spend is being repatriated away from global shopping locations with 70% of China’s luxury purchases now being completed at home. That is indicative of a structural shift in the luxury industry, with ESW data revealing luxury goods were the fastest growing cross-border ecommerce category in the first half of 2021.

Some 44% of respondents who had previously travelled abroad to shop indicated they would resume taking international shopping holidays once fully vaccinated.

The data also reveals the impact of Covid related safety concerns and the structural shift to online shopping, with more than two-fifths (41%) saying they would shop online as well as travel internationally to purchase.

Martim Avillez Oliveira, Chief Commercial Officer, EMEA and APAC at ESW, commented: “The events of the past 21 months have shown retail and luxury brands need to mitigate risks, diversify and balance their distribution to thrive. With international travel not expected to return to pre-pandemic levels before 2023 or 2024, brands need to find alternative routes to those highest value shoppers, who have a passion for British luxury and heritage brands and want to engage with and buy directly from brands.

“For those brands that don’t have the digital capabilities, expertise or capital required to fully leverage direct to consumer opportunities, ESW offers a seamless end-to-end solution that helps brands capitalise on this golden era for direct-to-consumer ecommerce.”

Brands partnering with ESW can enter new international markets in a matter of weeks, all while engaging directly with customers and retaining ownership of all the data collected during the shopping process.

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