Published
Apr 28, 2023
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Europe shopping data shows UK missing out after VAT refund abolition

Published
Apr 28, 2023

More and more retailers are speaking out against the UK government’s refusal bring back tax-free shopping for tourists and more and more data is being released to back up the retailers’ point of view.


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Just a few days after the bosses of Harrods and Fortnum’s spoke out and New West End Company put some figures on the impact the end of tax-free shopping has had, global payment technology specialist Planet has come up with more evidence. Its March Intelligence data that shows what UK retailers are missing due to no tax-free shopping, compared to the rest of Europe.

Its data shows that unlike Britain, “the European retail sector has enjoyed its best month for international spending on tax-free goods since the end of the pandemic after sales surged by 40% month on month in March 2023, taking them to just 21% below March 2019. That’s their highest level in nearly three years.

The data shows how the European Tax Free shopping market has shifted further towards Asian consumers with China, Taiwan and Korea all now in the list of top five source markets.

It added that, as Chinese travel resumes, the UK is missing out on the opportunity to cater to these tourists. Chinese consumers spent an average of €1,537 on tax-free products in Europe last month, making them the biggest spenders in the league of top nations.

France remains the most popular tax-free shopping market for Chinese shoppers capturing 54.9% of all their sales across the continent. After that, Italy took 11.5% and Germany 11.4%.

Although shoppers from the world’s second-largest economy increased their market share in March 2023 to 11.3%, the US retained top spot with a share of 19.8%. 

But the overall trend since September is one of a shrinking US market share and growing Chinese presence, with China tripling its share from 2% in Q3 2022 to 8% in Q1 2023. China’s influence across Europe is expected to grow further from this summer. And with overall sales to Chinese nationals still running 73% below pre-pandemic levels, growth potential is huge.

At the moment, 70% of Chinese consumers are saying they’d be more likely to visit the UK if a tax-free shopping scheme were available. So, there’s clearly a big issue Britain needs to address.

Before the UK government abolished tax-free tourist shopping in its previous form, there had been some hope that Britain’s exit from the EU would mean the perk would be extended to EU shoppers.

That didn’t happen. But the activity recorded among UK shoppers visiting Europe has shown that consumers who are able to shop tax-free in countries close to home are an important group. That means if EU shoppers could claim VAT refunds in Britain, they’d be more likely to shop in the UK.

UK shoppers are in the top five source nationalities for Europe’s retailers when it comes to tax-free shopping, even in the face of the growth from Asia. 

And in worse news for British stores, the ability of its affluent shoppers to get 20% off designer goods in, say, Paris, could mean they’re less likely to want to buy those designer goods in London, Edinburgh, Manchester or elsewhere in Britain.

Planet’s latest Intelligence report shows that in March, UK consumers spent most on tax-free products in France which captured 56.9% of all spending across Europe with an average transaction value of €1,870. Paris remains the preferred city destination taking 46.1% of all UK consumer spending.

That said, as far as spending in specific countries rather than cities is concerned, UK consumers spent more in Portugal where the average transaction value was a very healthy €2,032. Britons accounted for 11% of all sales across the country, their highest share in any major European market.   

And the UK's younger customers were key with Gen Z accounting for 27% of sales in March, almost three times more than other non-EU Gen Z shoppers. Affluent British Gen Zs in luxury stores, department stores, and watches and jewellery stores “over-index compared to other non-EU shoppers of this age group”.

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