SOUTH KOREA. The South Korean duty free market posted sales of US$1.38 billion in January, a sharp rise of +42.4% compared to the same month last year, driven by the strong contribution of the daigou (shuttle trader) business. The figures were first reported by Yonhap News Agency and since confirmed by The Moodie Davitt Report with the Korean Duty Free Association.
Sales to overseas customers surged by +50.9% to reach US$1.06 billion, exceeding the US$1 billion mark for the first time.
However, the number of shoppers from overseas fell sharply (-19.9%) to 1.34 million, while the average transaction value per person leapt by +88.6% to US$794.30, according to the association.
That surging per person spend was driven by the daigou trade that reached new heights in 2017. Sources in the market told Yonhap News Agency that most of the growth in January purchases came not from group tourists but from Chinese vendors doing private business.
These (usually) Chinese ‘shoppers’ travel to South Korea to purchase products for resale in China. However, while benefiting the top line, the daigou business has severely eroded retailer profitability due to surging commissions to travel agencies specialising in this market. An oversupply of duty free stores (thanks to the former government allowing a proliferation of downtown licences) has added to Korean retailers’ woes.
The daigou effect had a notable impact on the South Korean duty free market in 2017. Sales in the full year posted a +20.7% sales increase to a record US$12.8 billion despite a collapse in Chinese tourism from March 2017.
