Lisa Rivera

It’s in every airport around the world and you either drop in or walk on by.

When it comes to duty free shopping, how does it work, and are the discounts as good as they seem?

History of duty free shopping

In 1947, the first store was opened at Shannon Airport in Ireland. It was Irish businessman Brendan O'Regan who invented the concept of duty-free shopping, for those travelling between Europe and North America whose flights stopped for re-fuelling on their journeys.

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In the first few months of opening, demand exceeded all expectations. The store became bigger, and was officially called duty-free. Soon, the store model began to appear in other airports around the world, and numbers quickly rose to several hundred duty-free shops.

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Today the duty-free industry has a turnover that exceeds around $50 billion a year. This market is shared among the largest networks such as: DFS, Dufry, Flemingo International, Gebr. Heinemann and World Duty Free.

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Duty free shops are available not only at airports, but also at land checkpoints, with some even found in shopping centres, and on board ferries.

Why does duty free charge different prices?

If you travel and take a browse in the shops, you’ll notice how prices will differ at the same airport for different goods. What’s the reason?

Duty-free shops are exempt from the fees, excises and taxes on goods, but not for everything. Various taxes, including social taxes, on profits for example, are still valid. Secondly, you have to factor in logistics costs and other expenses.

Duty Free shops store their products in warehouses, and spend on logistics and rental of premises. And all this is taken into account in the price.

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Example: Perfume is brought in France and taken to Russia. Here’s it’s examined and undergoes a customs procedure. The perfume is then brought to the store, where it’s sold without the amount containing excise cost and fees.

However, the price to the customer already includes the cost of transportation, maintenance and rental of the store. The same process occurs in France. Transportation costs may lower, but the store rental price is more expensive.

Is duty free cheaper?

Some goods can be cheaper, if it comes from the country where it’s being sold. For example, some wines and cognacs can be cheaper in France due to the difference in fees. However, whiskey is often cheaper to buy in Russia than the UK, as are cigarettes. For gift ideas, Greece and the UK have traditionally lower prices for perfume.

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However, technology is having an impact on the duty-free industry. The internet means it’s now possible to buy similar products at the same price — if not cheaper than in duty-free shops. The only difference is that you don’t need to leave the house!

To reverse this trend, more duty-free stores are offering discounts of 10% or more to customers, when they order online in advance and collect their purchases before departure.

If you’re a keen duty-free shopper, it might be worth remembering this to cash in on some big savings!