How Hainan Can Become the Most Exciting Luxury Retail Destination in the World

Post by 
Matthew Ryan
Published 
September 28, 2020

A New Hainan

Many pundits have speculated on the future of Hainan Island as a shopping destination after a policy decision earlier this year to more than triple allowances for offshore duty free shopping from RMB30,000 ($4,219) to RMB100,000 per person/per year. With Chinese shoppers not being able to travel abroad this in the foreseeable, there is a clear pathway for Hainan to become a major shopping destination, especially in the luxury sector.

Sales of luxury goods in Hainan in this year have been impressive, mostly as a result of both COVID-19 restricting travel and the new increased allowances. In 2019, only 11% of Chinese luxury purchases were made domestically, with consumers traditionally preferring to travel abroad to buy luxury items. In 2020, sales of luxury goods at Hainan's duty free shops between July 1 to August 18 2020 soared to RMB 1.2 billion ( $ 173.7 million) representing a 420% increase over the previous year. 

Much of the speculation of the role of Hainan in China’s luxury market post-COVID has been considered a basic continuation of the situation right now. That is to say, Hainan to replace Hong Kong as a luxury shopping tourism destination for the rational luxury shoppers (discerning but price-sensitive first-tier consumers) or aspirational (generally lower-tier consumers new to luxury).

At Re-Hub we posit that Hainan has potential to become the most exciting luxury retail destination in the world and suck up the top-tier of Chinese luxury consumption. By creating a truly special retail and travel experience while leveraging the latest digital innovations, China’s high-spenders can be convinced to choose Sanya over Paris for big-ticket luxury purchases.

Perception of Hainan: A Family not Luxury Destination

Luxury is and has always been consumption at its most extraordinary. Any type of luxury consumer is expecting an extraordinary retail experience when they step into a boutique. From the service, to the products, to the visual merchandising, to the interior design to the after-service, everything should be memorable. If that boutique is in Paris, quite possibly for someone who has traveled thousands of miles, they could well expect that this experience will represent a peak one for their whole trip.

Although Hainan certainly has high-end malls, boutiques and luxury resorts, it’s not viewed as a premium luxury location, especially by younger consumers. In a recent report, Jing Daily interviewed luxury shoppers in Hainan in order to better understand their perception of the island as a high-end retail location. They found that Gen-Z consumers in particular considered Hainan to be more of a family location with lower cost luxury shopping. The collections in stores in Hainan are thought to be restricted and out of date, and if possible they would much rather go to Europe. 

Sanya DaDongHai Beach | Toby Simkin | Flickr
Hainan is considered more of a destination for family vacations than luxury retail


Due to COVID and the duty-free allowances, Hainan is booming as a luxury destination  for shoppers with nowhere else to go. But to truly capture the spending of the coveted Gen-Z segment and the elite of luxury shoppers, the experience of shopping in Hainan has to become extraordinarily special.

Manufacturing the Extraordinary 

The stakes are  clear, if brands can throw out the rulebook and go wild on upgrading Hainan into a luxury retail wonderland, there is potential to win the highest spending luxury shoppers in the world. Bain & Company speculates that Chinese consumers will make up half of global luxury purchases by 2025, estimated at $390 billion. Eventually, the COVID situation will subside, and brands and marketers are in a race against time to create a spectacular enough retail experience that will change minds of domestic consumers, especially the free-spending Gen-Z demographic.

Delight Travelers by Pushing the Boundaries of Social Retail Personalization

In June of 2020, Burberry in conjunction with Tencent, launched its first “social retail store” in China’s ‘Silicon Valley’. In order to attract digitally native Gen-Z consumers, the store features a number of jaw-dropping experiential elements that connect seamlessly with a WeChat mini-program. The mini-program acts as a digital companion in the store and customers can scan QR codes to get exclusive content regarding the products and the models wearing them. They are even able to use the mini-program for things like adjusting the lighting in the changing rooms. The experiences in the store is also gamified by allowing customers to win social currency through interactions within the store. The total experience is something that most shoppers have never experienced before and visiting the store has become an occasion in itself.

Burberry Taps Tencent For Shenzhen Social Retail Store | Jing Daily
The new Burberry store in Shenzhen pushes the concept of social retail and seamlessly merges online and offline experiences.

In Hainan, luxury brands should take this concept and ramp it up to a next level. A blend of the digital and physical helps younger consumers to build a deeper emotional experience with the brand and products. Visiting the store is a peak experience, as much retail as it is entertainment, and this should be the mold for retail experiences in Hainan.

Utilizing mostly the WeChat ecosystem, luxury brands have information on consumers that spans their purchase history, interactions with staff in stores, interaction with mini-programs and customer services. This kind of granular overview of consumer preferences and behavior is only possible in China.


When tourists visit Hainan, the luxury brand could leverage the amalgamation of these data points to take the role of concierge and orchestrate a series of personal special travel experiences that are the backdrop to purchases made. Brands for example could coordinate personalized hotel rooms aligned with the consumers taste profile. This could be paired with personalized dining experiences and menus at top restaurants. A whole host of activities and excursions such as wine-tasting, scuba diving, balloon rides and fashion shows can be built into the agenda. Before they set off for their trip, personalized content and teasers can be sent to the tourist to create excitement about what they will soon experience.

The retail aspects of the trip will also be similarly personalized. When they are taken to the boutique in Hainan, based on the preferences evident in the data, the consultant can prepare a personal collection for their visit.

The stores themselves can echo what Burberry did with Tencent in Shenzhen. Whether it's AI/AR, playlists, content, chatbot or myriad other experiences, everything is prepared for the individual shopper before they enter the store. No matter from where they come from, they will feel like a true VIP or celebrity.

We'll Always Have Paris….But Now we Go to Hainan


It's impossible for Hainan to compete with the grandeur, mystique and history of Paris. But through leveraging the unique amounts of user data that is only available to brands in China, Hainan can become a more consistently fantastic luxury travel location than anywhere else in the world. Shoppers can be assured that when they arrange a short trip to Hainan, they will be truly wowed and can still be back in the office at the beginning of the week.

In this model, Hainan becomes the crescendo of the Chinese luxury retail journey. Shoppers in China, and especially Gen Z do most of their research on luxury products online. They require a lot of interaction with digital touchpoints before they are ready to purchase. As a result brands can hone the process to promote research domestically on the mainland and push the shopper to make the final purchase in Hainan. This can be done through either comping them flights and hotels or just through the attraction of having a tailored, wonderful experience without even having to dust off the passport.

Key Takeaways

  1. Hainan is booming as a luxury retail location due to a tripling of duty free shopping allowances and Chinese shoppers not being able to travel overseas. 89% of Chinese luxury purchases were made overseas in 2019, so the current situation represents a boon for the domestic luxury market.
  2. The challenge is to maintain Hainan as a preferred destination for luxury retail after COVID. Although more price-conscious consumers will opt for Hainan, the general perception among moneyed Chinese and Gen-Z is that it is more a family destination than a luxury one.
  3. By harnessing the immense amount of consumer data available to brands in China and utilizing the latest retail innovations, it is possible to make the luxury retail experience in Hainan the most exciting in the world.
  4. Brands can also play the role of concierge and leverage customer data to tailor unique travel and dining experiences for individual customers.
  5. Through the combination of these extraordinary retail and travel experiences, Hainan can become the most consistently special luxury retail destination for Chinese shoppers and capture the high percentage of China’s soon to be $390 billion luxury spending.



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