(Note: This episode originally ran in 2018.)Is it really cheaper to shop at an airport Duty Free store? And why are so many of them alike?In the 1940s, if you were flying from New York City to London or Paris you would find yourself making a pit stop for fuel on the western coast of Ireland. The Shannon airport at the time wasn't much to look at, but the passengers arriving there were movie stars and celebrities, basically the super rich. And the people of Shannon realized pretty quickly that they needed to upgrade the local amenities for their wealthy clientele. They hired a man named Brendan O'Regan to make it happen. Being the quick-thinking entrepreneur that he was, O'Regan convinced the Irish government to create a tax loophole. And thus, duty free stores were born. Today on the show, we follow the surprising origin of duty free, and try to answer the question: Are they really saving you any money?Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What is the history of duty-free shopping?
This episode originally ran in 2018, and it is likely to save you money and make you giggle in 2025.
This is Planet Money from NPR.
Hey, I'm just leaving a voice memo for myself. I'm in the Shannon Airport in Shannon, Ireland, on my way back to the United States, to New York. There is this picture wall, giant pictures of all the famous people who have come through here. So, you know, they have, like, John F. Kennedy, and there's Fidel Castro and Boris Yeltsin. And there is one photo that was sort of amazing.
There's a picture of the president of Ireland, and next to him is someone called Dr. Brendan O'Regan. And he's sort of out of focus. You can see he's wearing a natty suit. He's got a nice little pocket square. And it says that Dr. O'Regan was the person responsible for this airport, for basically developing the Shannon International Airport.
And most importantly, he created the world's first airport duty-free shop. You know, the duty-free shop, the place where you get the perfume and the chocolates and all the liquor. First one was here. And before I get on the flight, I just wanted to rush quickly over and take a look at what was the world's first duty-free. A lot of scarves, a little jewelry. Where's the perfume? Hello, darling.
How's it going? This is Jessie Baker. I'm buying sheep. Oh, they're adorable. Cliche, but my children don't judge. I think duty-free shops are supported on people who forgot to get gifts for their children.
I didn't forget. I've just been busy.
You getting them at the duty-free shop. Hey, no shame here. I bought chocolates for my kids.
You want 206 to New York?
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Chapter 2: Who was Brendan O'Regan and what did he do?
And we'll answer the question I know that I have asked over and over again. Are we really saving any money at the duty-free shop? The story of duty-free starts with a bit of Irish luck.
In the 1940s, when people were traveling from New York to London or Paris, they were in these propeller planes. And to refuel, they had to land in the first runway they saw after crossing the Atlantic. And that was Western Ireland, County Clare, along the Shannon River.
And so here was this former mudflat that all of a sudden became the grand gateway to Europe.
In the 40s and 50s, every famous person that crossed the Atlantic almost certainly wound up going through Shannon.
So movie stars, presidents, prime ministers, kings and queens, they all landed at Shannon.
They all had to land at Shannon Airport.
Brian O'Connell was a businessman in the region, still lives there. And he says that everyone realized pretty quickly that they needed to upgrade the local amenities for all these movie stars. In those days, the airplane ride from the United States was long and uncomfortable and bumpy. Sometimes it was even in these flying boats, basically planes that would land on water.
You were probably tired. You could be cold because, obviously, particularly the flying boats flew quite low over the Atlantic compared with planes today. So people were looking forward particularly to good food and good drink.
This is when our duty-free hero, Dr. Brendan O'Regan, enters the story.
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Chapter 3: How did the first duty-free shop at Shannon Airport come to be?
Wait, was this like a farmer's market in the airport?
I think the local stuff was kind of for show because honestly, from the beginning, this was all about cigarettes and alcohol. Whiskey and smokes were apparently one third the price you would pay outside the airport. It was so cheap that the Irish government was paranoid that Irish gangs would try to smuggle alcohol out of the airport. I mean, you could make a fortune, right? Yeah.
They required O'Regan to take inventory three times a day. He had to account for every single bottle. If he accidentally dropped or misplaced a single bottle, he would have to pay all the taxes on it.
And this was a hit. Within just six months, O'Regan had to expand the store because all of these other manufacturers wanted their products in there, too. I mean, this was a captive market of rich people. Sure. On vacation. Yeah. So in came the Leica cameras and the Omega Swiss watches.
And even relatively inexpensive products discovered that they could get some of that airport glamour by just getting placed between the Chanel No. 5 and the cuckoo clocks. At least that's what Mr. Tobler of Switzerland thought.
Mr. Tobler was a real person.
Wait, Mr. Tobler?
Theodore Tobler, Theodore Tobler, who... created the chocolate bar.
Not just any chocolate bar, the Toblerone, a triangular prism of deliciousness. It was sold in that very first Shannon duty-free shop. Tom Armitage is an executive with Mondelez International, which owns Toblerone.
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Chapter 4: What products were initially sold in duty-free shops?
Nougat? I don't think I've ever said it out loud.
Nougat. I just called it nougat, but we can call it nugget.
Nougat? Nougat. Anyway, but I know that duty-free was a huge break for the chocolate bar, which is odd because there aren't really heavy duties and taxes on chocolate, not like alcohol. But... It did fit the duty-free aesthetic. It was kind of weird, fancy-looking. Yet you could buy it with leftover change in your pocket from what you didn't spend on that Swiss watch.
Exactly. It would take a few more years for Toblerone and the duty-free concept to spread worldwide. All these international delegations would visit O'Regan's shop, and they saw how much he was making, and they thought, wait a minute, anyone could do this. Amsterdam opened the second duty-free shop in the world in their airport in 1957. In 1962. Yes.
A private company, DFS, opened the first duty-free shop in the United States, in Hawaii.
Tom Armitage, the Toblerone guy, says that the numbers just took off from there. Duty-free stores will do $70 billion worth of business just this year. Wow. $5 billion of that is candy. And Tom will give you the chocolate stats all day long.
If you thought of duty-free as a country, it would be the ninth biggest chocolate market in the world.
Wow. Okay.
The ninth biggest chocolate market in the world, effectively just behind France and just ahead of India.
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Chapter 5: How does duty-free shopping compare to regular shopping?
It was O'Regan's gift to all of us travelers. But exactly how generous a gift was it? We'll have the answer after the break. So that was the history of Duty Free, but now the psychology of Duty Free. Because when I walk through these places in airport, there is this strange feeling that comes over me. I feel like I'm part of this exclusive club.
You know, I've just paid hundreds of dollars for a ticket. I've presented my passport. There's people with guns guarding it. And then I walk through, and it's so bright. And it's filled with all these vices of cigarettes and alcohol. So many scotches, so many scotches and whiskeys.
And also, you're a little bored. So it's basically the classic setup to spend too much money. By design. Obviously. We actually tried to find a definitive study to find out how much of a break you're really getting at Duty Free. Yes, there are no taxes. but you have to pay for all this very expensive airport retail space.
So it's almost impossible to figure out the bottom line. Every duty-free store has different prices, different exchange rates, and the tax break depends on how much tax you usually pay back at home. So I tried to get at least some anecdotal data. I was traveling with my family through the Milan airport in Italy, and my daughter Elsie and I spent an hour logging all the prices.
Here's a carton of Camel cigarettes.
39.5 euros. Provossier VSOP. 48.5 euros. Jameson.
24 euros. You don't buy that. That could be a deal.
17 euros. 18.2 euros. You saved 7.8 euros.
Same. And what was your verdict on duty-free? It depends. I know, that is not the answer you want to hear. I will tell you that tax-free cigarettes are criminally cheap, under $5 a pack, and they're almost three times that here in New York City. So if you want cigarettes, you should buy cigarettes and duty-free. But other deals are harder to find. So my daughter Elsie is an expert in makeup.
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Chapter 6: What tax advantages do duty-free shops provide?
Wait, even though they ship it all the way to Milan?
And then you have to carry it all the way back? True. But Courvoisier from France next door to Italy was more expensive in the duty-free than it is here in New York. And Toblerone's, I hate to disappoint you, were almost double the U.S. price.
Wait, so if we aren't always getting a huge deal on products and the governments are losing out on tax revenue, then what's the point?
Well, here's my theory on this. It's that, you know, when Ireland first started duty free, it was this true bargain for the flyer. And Ireland got all these benefits from the extra tourist business. But then what happens is this sort of race to the bottom. Every other airport starts to offer the exact same tax breaks just to compete.
And then once everyone has a duty-free shop, then there's pressure just to make your airport's duty-free shop bigger and brighter and fancier.
Exactly. Everyone ends up with this sort of expensive shopping mall. And somewhere in all of this, the tax break concept just sort of gets lost. Prices start to sneak back up because who can really tell?
And suddenly the people making the money are not the travelers, but the shops themselves and the airports, which you'll notice are now redesigning themselves to provide even more space for duty free.
OK, Cosmopolitans, if you spot a glitch in the international trade system, we would love to hear about it. We are at Planet Money in the usual places and planetmoneyatnpr.org on email.
This episode of Planet Money was originally produced by Sally Helm and Megan Tan and edited by Bryant Ertstadt. This version was produced by Willa Rubin. Our executive producer is Alex Goldmark. I'm Jeff Guo. I'm Karen Duffin. And I'm Robert Smith. Thanks for listening.
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