For most Indian travellers, the duty-free alcohol store is the top destination

Indians’ obsession with picking up alcohol at its international airports might lead to a quadrupling of the duty-free market to over $800 million (Rs 5,184 crore) by 2025.

This market, estimated at $200 million in the country, is set to grow at a compounded annual growth rate of 20% till 2025, a report by Bengaluru-headquartered RedSeer Consulting says.

The growth will mainly be fueled by “rising spending power of the middle class, increasing foreign tourist arrivals, and (the) high growth phase of Indian airports,” the report said.

Considering that out of 42 international airports in India, duty-free zones exist in only 17 – four private ones and 13 under the Airport Authority of India – there is immense scope for duty-free retail to grow.

Diversifying buying habits

Alcohol sales have been the star of the show with 80% of revenue in this segment coming from wines, spirits, and more.

However, it may not be as skewed towards alcohol in the future, Shubham Anand, head of retail-consumer packaged goods (CPG) at RedSeer, told Quartz. Although liquor will hold strong, “consumers of chocolate and other confectionery, consumers of cosmetics, will increase. The basket mix will change,” Anand said.

Electronics, which logs next to no sales right now, is likely to still remain out of the picture “due to international competition, high rent, and space constraint,” RedSeer noted. Other markets in southeast Asia, like Dubai and Thailand, offer far more competitive deals on hardware, Anand added.

Top destinations for duty-free

Currently, New Delhi’s Indira Gandhi International Airport, the country’s largest duty-free retail space with over a 1,000 brands and more than 43,000 products, leads with Rs 300 crore in sales, as per RedSeer’s estimates. Mumbai’s Chhatrapati Shivaji International Airport follows with Rs 250 crore.

While other hotspots may emerge, dethroning the top two is next to impossible given the sheer volumes. Indira Gandhi International Airport and Chhatrapati Shivaji International Airport each handle a whopping 55 million and 45 million passengers respectively annually. These airports also see the most number of vacationers and business travelers as opposed to, say, a city like Chennai, used by many west Asia-bound blue-collar workers with lesser spending power.

The pecking order is as follows:

Finding the foreigners

Since India is not a connecting hub, most duty-free customers – over 80% of them – are Indians themselves. Pre-ordering, wherein people place orders before travelling overseas and have it delivered on their way back, is the most popular shopping method.

However, as an element of standardisation spreads, with players like GMR and Flemingo setting shop across airports, the scales may tilt away from Indians. “These top duty-free retailers bring an interesting mix of products with compelling offers,” RedSeer’s Anand, a consultant for the Airport Authority of India on generating non-aero revenue across airports, said.

Another way to lure more foreign buyers on their way back from India is to introduce indigenous brands. “In the Mumbai airport, Amrapalli jewellery is selling, Indian artifacts are selling...when tourists start spending more on these, sales would increase,” said Anand. At the moment, these will just count as travel retail and non-duty free. But the government could make such Indian products tax- and duty-free, he added.

This article first appeared on Quartz.