Why did China Duty Free Group experience a significant decline in the Shanghai market?

Interface News reporter | Lou Yuqin

Interface News editor | Xu Yue

One data point in China Duty Free’s 2025 annual report is particularly striking: revenue in the Shanghai region plunged from 16.035 billion yuan to 12.010 billion yuan, down 25.10% year over year. Just in this one area, it sold 4 billion yuan less than the previous year.

A useful comparison is that, overall, China Duty Free’s total revenue in 2025 also declined. Its annual revenue was 53.694 billion yuan, down 4.92% year over year. But in the Hainan region, its revenue fell only slightly by 1.23%. So where did the 4 billion yuan go?

Consumers who have been paying attention to China Duty Free might, at first glance, believe this is related to the loss of Shanghai airport duty-free business in Yishang Shanghai. But in fact, the bidding for the relevant airport duty-free business took place at the end of 2025, so its impact on China Duty Free’s 2025 revenue is limited.

The biggest impact is on the Shanghai region, which then drags down China Duty Free’s full-year revenue as a whole, driven by the contraction of duty-paid goods business.

In 2025, China Duty Free’s sales of duty-paid goods recorded only 13.388 billion yuan, down 21.69% year over year. Shanghai is precisely the company’s “stronghold” for its duty-paid business. For example, online platforms such as cdf Member Purchase Shanghai, which emerged during the pandemic, are a core part of this business segment.

China Duty Free’s official explanation for this is: “Competition among online sales channels has become increasingly intense, and sales of duty-paid goods have decreased.” But the outside world generally believes that the contraction of the duty-paid goods business is also an active choice it made.

Because the gross margin of this segment of business, and it also affects brand image. A relevant reference is that China Duty Free’s gross margin for the fourth quarter of fiscal year 2025 rose to 33.4%, up 5% year over year. In fact, although China Duty Free has never “officially,” and “formally,” stated that it plans to shut down this business segment, on social networks it can be seen that many consumers are discussing a quiet adjustment to online channels, including cdf Member Purchase Shanghai. For instance, some consumers complained in 2025 that they encountered out-of-stock situations more and more frequently in the cdf Member Purchase mini program, and that it even no longer supports purchases.

Another factor affecting China Duty Free’s revenue in Shanghai is the weakness of Yishang Shanghai.

Before the end of 2025, Yishang Shanghai was operating the core airport duty-free business in Shanghai. In fiscal year 20205, the revenue from this segment was 6.87 billion yuan, down 19% year over year, but attributable net profit reached 370 million yuan, up 18%. This kind of “increasing profits without increasing revenue” also reflects a shift in China Duty Free’s overall strategy. Consistent with the logic of shrinking its duty-paid goods business, China Duty Free as a whole hopes to pursue higher profits. Objectively, the put-into-use investment of Pudong Airport’s T3 also diverted some passenger flow. Although China Duty Free has duty-free stores there, these stores are still in the business ramp-up stage, showing relatively unstable performance, and their contribution to overall growth in results is limited.

In addition, the performance of Shanghai airport channels mainly relies on international passenger flow. This is a variable that has recovered more slowly after the pandemic. Combined with factors such as consumers’ cross-border price comparisons and the diversion of Korean and Japanese personal purchases, sales of duty-free goods at Shanghai airport are under pressure.

Looking ahead, overall, China Duty Free is both making proactive adjustments on one hand and also passively responding to changes in various macro conditions on the other. This trend is sustainable.

As mentioned earlier, at the end of 2025, results of a new round of bidding for duty-free operating rights at Shanghai airport were released. Although Pudong T1 terminal building was won by a competitor, China Duty Free retained the duty-free operating rights for the Pudong T2 terminal building and the S2 satellite hall, as well as for Hongqiao Airport. Moreover, for the Pudong T2 terminal business that it retained, China Duty Free changed the operation model to a joint venture with Shanghai airport—China Duty Free holds 51% and Shanghai airport holds 49%. Before this, duty-free stores and Shanghai airport basically cooperated using a “commission-and-point” model. This shift means the airport has moved from being just a landlord to becoming a partner.

For China Duty Free, although it gave up part of its equity to the airport, it gained a more stable partnership and lower operational risk. To a certain extent, this allows China Duty Free to pursue profits more comfortably, rather than simply expanding revenue by chasing low-price promotions and other means solely to meet commission targets. A data reference to consider together is that in the fourth quarter of 2025, China Duty Free’s selling expenses fell 1.8% year over year.

Worth mentioning is that, from multiple dimensions, China Duty Free hopes to diversify the sources of its revenue growth.

According to the financial report, in 2025 China Duty Free achieved better performance in the Hainan market. Since September, Hainan’s duty-free tax-free sales for island departure have been turned to positive year over year. Within one month after the launch of the “close-the-whole-island” customs operations in December, the spending amount for duty-free shopping for island departure soared 46.8% year over year. Policy tailwinds, combined with an operational upgrade of “duty-free + culture and tourism,” allowed the Hainan market to rebound quickly.

A surge of R&D expenses by 352.74% to 900 million yuan also shows that China Duty Free is allocating resources toward digitization, membership systems, and the supply chain. It is trying to reduce reliance on a single channel through technological means.