SOUTH KOREA/CHINA. French luxury house Louis Vuitton is progressively withdrawing from much of its downtown duty free business – including its long-standing and expansive Korean presence – The Moodie Davitt Report can confirm.
It is understood that the brand remains fully committed to travel retail but with a refocus on airports – including a fast-growing footprint in Chinese domestic air terminals. Louis Vuitton’s downtown stores in Macau that are focused on FIT rather than group tour business and the brand’s duty paid business with DFS in Okinawa will remain open. However, its downtown duty free stores in Hong Kong with DFS are set to be closed in due course.
The company is reliably understood to have informed Korean travel retailers of the decision last month, in what one local observer called “shock news” and another a “body blow”. No set timeline has been imposed in order to allow for a measured withdrawal, according to local sources.
“This decision will shock the whole regional luxury market, not only the duty free area,” said one Korean travel retail veteran.
“We are constantly reviewing our retail network and are in discussions with all travel retail operators as how to best optimise the recovery of the travel retail market,” a Louis Vuitton spokesman told The Moodie Davitt Report.
The Moodie Davitt Report has approached Korean travel retailers Lotte Duty Free, The Shilla Duty Free and Shinsegae Duty Free for comment.
Stepped-up airport retail focus
Louis Vuitton currently has four downtown duty free stores in Seoul, one in Busan and two in Jeju. Its store at Incheon International Airport Terminal 1 is unaffected by the downtown decision and in fact the company hopes to open a second store at Incheon T2 by 2023.
Louis Vuitton plans to have six airport stores open in China by the end of 2022, including its existing stores at Beijing Capital International (it also opened in the domestic zone at the new Beijing Daxing International Airport in 2019) and Shanghai Hongqiao, which airport sources say are generating extraordinary sales. As reported, the company is also set to open a spectacular new duplex store at Hong Kong International Airport.
Reliable sources in Korea suggest that Louis Vuitton wishes to move away from group tour-focused downtown stores into FIT-orientated businesses such as Chinese domestic airports, as well as the high-end Macau locations. There it believes it can provide complementary high-class service and care to its exclusive clientele as opposed to the more transactional nature of business in group tour-orientated environments.
The decision to pull back from Korean downtown duty free may also reflect some disquiet as to the increasingly daigou-driven nature of those stores, especially since 2017 after the THAAD anti-missile system dispute between China and South Korea. That row led to a collapse in traditional Chinese tourism to the Republic, with the market becoming increasingly reliant on daigou trade (and almost wholly reliant on it in COVID-hit 2020 and 2021).
China calls
The move also underlines Louis Vuitton’s increased focus on China – by 2025 it expects to have a local market store in every Chinese province – and its simultaneous belief that airport retail will play a major role in terms of serving the Chinese consumer.
Although pricing in Chinese domestic terminals is on parity with the local market, the brand is still able to generate huge levels of business due to heavy demand, high passenger volumes and the ability to provide high-class store, VIP and aftersales service to a local consumer.
The latest developments represent an extraordinary turnaround from former days when Louis Vuitton eschewed the airport retail scene. That all changed in September 2011 when it opened a 550sq m store at Incheon International Airport in association with The Shilla Duty Free. And it has since opened in numerous airport locations including Changi, Heathrow (T3 and T5), Istanbul and Rome Fiumicino, as well as the Chinese locations mentioned above.
The story also underlines the growing role of Chinese domestic airport retail in reaching out to a brand-conscious consumer across a vast nation. With their heavy foot traffic, key domestic airports also play a key shop window role for luxury brands, led by Louis Vuitton.
[Click on the YouTube icon to hear Martin Moodie’s videocast from Incheon International Airport in September 2011, shot the day after Louis Vuitton opened its first-ever airport store, at the time run in association with The Shilla Duty Free. Today the company boasts an extensive airport retail network with several more stores set to open through 2022.]
