The End of Airport Duty-Free Shops?

Only products that have high taxes are worth buying behind passport control.

Ever since the first duty-free store was opened at Shannon Airport in Ireland in 1947 for passengers anxiously awaiting connections to or from transatlantic flights, a great deal of money has been spent on goods available in the neutral territory behind the passport control line. But how much longer will duty-free shops actually be needed by consumers?

The prices in duty-free stores are lower because the goods are relieved of taxes and customs fees, as they have not crossed the customs border of the state where they are sold. Duty-free shops can be found today, of course, in virtually every airport around the world. But this kind of shopping may not always be fair to the consumer. It is only the products that typically have the most taxes in a normal store that come with the biggest discounts duty free. Alcohol and tobacco products, perfumes and cosmetics have the highest taxes, so it’s these goods that tend to be cheaper in duty-free stores.

Other products may not be giving consumers such favourable discounts – but it depends where you shop. The international airport in Dubai presents one of the world’s most extensive duty-free shopping areas. It also has good prices, with some goods available 50% cheaper than in the city. Swiss watches, meanwhile, are 20% cheaper than they are in Switzerland’s own duty-free shops.

At Heathrow’s duty-free boutiques, new collections of designer clothes often arrive earlier than they appear in the shops on Oxford Street. But elsewhere in Europe, duty-free prices tend to be the same as those in shops in the city, or even higher. Consumers notice this, which provokes the question of whether they are necessary at all other than for sales of alcohol, tobacco, perfumes and cosmetics.

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