(Yicai) Dec. 19 -- State-owned China Duty Free Group and Dufry Shanghai Commercial, the Chinese unit of Swiss travel retail giant Avolta, will replace Sunrise Duty Free Shanghai as the new operators of duty-free shops at Shanghai's two international airports.

CDF will operate duty-free stores at Shanghai Pudong International Airport's Terminal 2 and satellite hall and Shanghai Hongqiao International Airport's Terminal 1, while Dufry will operate duty-free stores at Pudong Airport's Terminal 1 and its satellite hall, Shanghai International Airport announced on Dec. 17.

The concession contracts, which will last eight years, starting from Jan. 1, expand the operating area by 1,564 square meters and broaden the product range to phones, drones, mother and baby products, and healthy foods. They also mandate the introduction of time-honored Chinese brands and intangible cultural heritage products.

Dufry will pay Shanghai International Airport a fixed monthly rent of CNY3,141 (USD445) per sqm for Pudong Airport's T1. Meanwhile, CDF will pay fixed monthly rents of CNY3,090 per sqm for Pudong Airport's T2 and CNY2,827 per sqm for Hongqiao Airport's T1. The sales commission rate for Pudong Airport will range from 8 percent to 24 percent, and that for Hongqiao Airport from 8 percent to 22 percent.

Shanghai International Airport also announced it will establish joint ventures with both CDF and Dufry to operate the duty-free stores. The company will hold a 49 percent stake in each of the JVs.

"The competitive landscape in the duty-free market is changing," an insider at Shanghai International Airport told Yicai. "The firm is shifting its strategy by slashing commission rates to benefit duty-free operators and boost sales volume, achieving a win-win cooperation through the JVs."

The commission rates agreed by Sunrise Duty Free and Shanghai International Airport were up to 42.5 percent before the Covid-19 pandemic.

Sunrise Duty Free, of which CDF controls 51 percent, was excluded from the bidding after four directors appointed by CDF voted against its participation at a board meeting on Dec. 6.

Previously, CDF operated offshore duty-free stores in Hainan, while Sunrise Duty Free focused on duty-free operations at Shanghai airports and Beijing Capital International Airport's Terminal 3.

Beijing Capital Airport has also recently launched a new round of bidding for duty-free franchise rights at T2 and T3 for nearly eight years, with the bid submission deadline set for today. CDF currently operates T2, while Sunrise Duty Free runs T3.

Shanghai International Airport [SHA: 600009] was trading up 0.4 percent at CNY33.24 (USD4.72) as of lunch break today, after gaining as much as 7.1 percent yesterday. Shares of CDF’s listed arm China Tourism Group Duty Free [SHA: 601888] surged 7.3 percent to CNY82.05 (USD11.65) as of lunch break today but fell 4 percent yesterday.

Editor: Futura Costaglione