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Tax Free shopping has evolved from a tourist perk into a strategic lever for luxury brands. It boosts sales and deepens engagement with high,value consumers. According to Planet Market Intelligence, Tax Free shopping grew by over 25% last year, signalling a structural shift in global retail. With 80% of Tax Free sales stemming from luxury, affluent travelers are using VAT refunds to make high-ticket purchases more attractive.
Experience is the differentiator
Brands are refining in-store experiences with mobile-first refunds and VIP lounges. These changes aren’t just convenient; they create a seamless, elevated journey aligned with global luxury expectations.
Luxury watches: momentum and markets
The high-end timepiece market is projected to grow from US$59.97bn in 2024 to US$134.53bn by 2032 (CAGR 12.23%). The US remains the largest market, while China is rapidly closing the gap in volume and engagement.
China’s role and Swiss dominance
China’s luxury watch market was US$18.12bn in 2024 and is forecast to reach US$30.02bn by 2032 (CAGR 5.77%). Growth is driven by collectibles, craftsmanship, and watches as investment assets. Tax Free shopping amplifies the appeal of brands like Rolex, Patek Philippe and Audemars Piguet,often priced in the five figures. Swiss-made watches dominate, with Rolex, Omega and Patek Philippe leading. Many Chinese buyers purchase abroad due to limited supply and higher domestic prices.
Beauty outpacing fashion
Luxury beauty is outselling couture in many markets as consumers invest in skincare and wellness. A McKinsey report cited in Veblen International puts luxury beauty growth at 7.2% annually, outpacing mass cosmetics. Ultra-premium products such as Dior’s L’Or de Vie La Cure (over £1,000) are positioned as alternatives to aesthetic procedures.
The behaviour shift: value, longevity, experience
High-net-worth individuals increasingly prioritise value, longevity and experience over mere logo appeal. Tax Free shopping supports this by making premium purchases more financially accessible.
Where Tax Free delivers most
Destinations such as Paris, Milan and Madrid can offer VAT refunds up to ~20%. Beyond Europe, the UAE, Korea and Japan are increasingly attractive for international luxury purchases thanks to efficient Tax Free processes.
The UK exception and what it costs
Post-Brexit, the UK’s removal of Tax Free shopping shows the flip side. Tourists are diverting spend to continental Europe, while UK citizens continue to benefit from Tax Free shopping abroad, contributing to sluggish domestic luxury sales.
What this means for luxury brands
- Design for Tax Free: Treat refunds as part of the experience, not an afterthought.
- Merchandise to moments: Align inventory and staffing to international travel peaks.
- Lean into “investment” categories: Watches and high-end beauty have durable demand.
- Meet travellers where they are: Prioritise destinations and channels with strong refund value and smooth execution.
Tax Free shopping is no longer a transactional benefit; it’s a strategic enabler of luxury growth. By reducing friction at the point of sale and elevating the experience, brands convert interest into investment. As watches and beauty continue to outperform, Tax Free shopping will remain a cornerstone of global luxury retail strategy.
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