Beijing Department Store Wangfujing Opens In Hainan In Time To Cash In On Chinese New Year

Department store retailer Wangfujing has opened its first store in Hainan, the duty-free shopping haven in China where sales boomed during the pandemic when Chinese consumers could not travel abroad.

The Shanghai-listed company held a lavish opening ceremony on January 18, just ahead of the Chinese New Year rush. The property, with a total construction area of over 1.1 million square feet, is self-owned and will be expanded in three phases in Wanning City in the southeast of Hainan.

Under the fascia, WFJ Duty Free, the parent department store group calls the new operation “a starting point” for the company’s dual tax + tax-free business.

As a first toe into duty-free waters for Wangfujing, the choice of Wanning City might strike some observers as an unusual choice. Sanya the tourism center of Hainan; Haikou, the capital; and nearby Mission Hills, have been the preferred, and more obvious, locations for rivals like China Duty Free Group (which recently opened the world’s biggest duty-free mall), CNSC, DFS Group, Dufry, and Lagardère Travel Retail.

Wangfujing says it will rely on Wanning’s “unique coastal culture and tourism features” to help drive traffic, as well as its name which is an iconic national brand in the world of Chinese retailing. Over the Spring Festival/Chinese New Year period, Wangfujing can also rely on pent-up travel demand to generate traffic, now that China has dropped its zero-Covid policy.

Official government data (up to last Wednesday) showed that a total of 480 million trips had been made since the Spring Festival rush began on January 7. That is an increase compared with 2020, but is still 47% down compared with pre-pandemic 2019.

For Hainan, the travel picture looks even better. Seat analyst ForwardKeys said that flight bookings to Sanya and Haikou—Hainan’s main gateways—were among the three most resilient in China (the other being Chengdu). Sanya was at 102% of 2019 levels, and Haikou at 88%. “Forward bookings for Chinese New Year are currently 47% behind pre-pandemic levels but 30% ahead of last year,” said ForwardKeys China market analyst Nan DaiDAI
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Flower power

Wangfujing said that the WFJ Duty Free store was designed by “a well-known Italian team” combining the cultural and tourism characteristics of the international coastal city it is in. Though the building looks unremarkable, its scale alone marks it out as a new landmark of Wanning City. Given that Wanning is famous for tropical rain forests, a major theme is fantasy flowers and plants, developed in cooperation with well-known artists.

The first phase of the project has introduced nearly 400 brands in nine categories including aromatherapy, gold accessories, digital home appliances, home furnishing, drinks, children, health care products, food and coffee, and sporting goods. Among the 400 brands, at least 20 are said to be ‘firsts’ in the Hainan market.

The official opening of the Hainan store last week did not have much impact on investors, with Wangfujing’s share price trending downwards slightly. In the nine months ending September 30, 2022, Wangfujing Group reported sales of $1.15 billion (Chinese yuan 8,466 million), compared to $1.3 billion in the same period a year earlier, while basic earnings per share from continuing operations were cut in half.

In January, Hainan’s provincial government said it was targeting GDP growth of almost 10% this year, higher than the country average, expected to come in at up to 6%. The authorities plan to do that, in part, by increasing year-over-year numbers of tourists and tourist revenues by 20% and 25% respectively.