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Alibaba Flexes Logistics Muscle In World’s Biggest Duty-Free Hotspot


Dedicated freight charter flights from Singapore to China’s offshore duty-free island of Hainan have been launched by Cainiao Smart Logistics Network to meet the surging demand for imported luxury brands. And from early May, the company will launch the first smart warehouses for duty-free goods in bonded areas in the province.

These moves ensure that goods from Singapore can be sold in Sanya—the main tourist and shopping hub—within 12 hours after clearing customs. Cross-border deliveries typically take up to three days as they have to first land in Shenzhen or Guangzhou, before being transported to Hainan via trucks and ferries.

Hainan has seen rocketing luxury sales ever since the duty-free allowance was trebled in July 2020. Over the Chinese New Year period in February, sales volumes on the island topped $230 million. Average daily turnover was four times that of the SKP mall in Beijing according to consultancy Agility Research & Strategy which signals an extraordinary level of demand since SKP was recently ranked as the world’s biggest-selling shopping location.

A consumer products expo in a week’s time, will fuel further demand. It is expected to attract more than 1,200 brands from some 600 exhibitors including the world’s most powerful conglomerates such as LVMH, Kering Group, L’Oréal, Pernod Ricard, Richemont Group and Swatch. With such a targeted approach, customs authorities expect Hainan’s duty-free business this year to hit $9 billion, which would be up by 80% on 2020, while $15.5 billion is the goal for 2022.

Alibaba Group

BABA
is keen to get a slice of this growing retail cake. Last year it took a stake in Dufry one of the word’s biggest travel retailers—which has also begun operations in Hainan—and this latest step into cross-border supply fits nicely with its plans.

Cainiao, Alibaba’s logistics arm, has just launched seven weekly flights, shipping international goods to duty-free shops in Hainan’s Free Trade Zone via the tourist city of Sanya and the capital Haikou. Five are direct Singapore-Haikou flights and two include an extra stop in Guangzhou: Singapore-Sanya-Guangzhou.

Bigger ambitions than Singapore

Cainiao says these services are targeted at global beauty and luxury brands wanting to enter Hainan, and will also enable the export of Chinese domestic e-commerce goods, for example electronic devices and tropical fruits, to Singapore. But the company has its sights set more strategically.

James Zhao, Cainiao’s general manager for global supply chains, told me: “With the booming demand from Chinese consumers it is our near-term plan to launch more direct cargo flights and connect Hainan to more countries and regions. We will make the announcements when the routes are finalized and due to launch.”

Markets that are being evaluated include Japan, South Korea, Australia and New Zealand, but also Europe where many luxury and beauty houses are based.

Tenfold increase in volumes

Although the Singapore route has just been established, Cainiao’s research suggests there is a huge unserved market. “We expect cargo volumes between Hainan and Singapore to increase tenfold in the next three years,” he said. “Hainan will be a pivotal priority for Cainiao in the coming years.”

Right now though, the company is looking to partner with brands, agents, suppliers, and retailers in Hainan, including those that have duty-free licenses to operate there. “We are also in talks with those that have not yet made…



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