SOUTH KOREA. Duty free shopping on so-called ‘Non-landing tourism flights’ or ‘Flights to nowhere’ generated average sales of KW1.2 million (US$1,075) per customer for Lotte Duty Free in the first quarter of 2021, with the March figure rising to KW1.62 billion (US$1,450), the retailer revealed today.
With outbound and inbound travel heavily restricted by the pandemic, such flights have become a novel way for passengers to experience the joy of flight while also benefiting from duty free allowances. Since Asiana Airlines offered the first destination-less flight on 12 December, seven airlines have operated 75 flights to nowhere that have attracted about 8,000 passengers, Yonhap News Agency reported today, citing the Ministry of Land, Infrastructure and Transport.
“As with overseas departures, duty free purchases are available, and more and more passengers use it as an opportunity for shopping,” Lotte Duty Free said. “The unit price of passengers on a non-landing tour is three times higher than that before the coronavirus. The tariffs imposed on excess [i.e. above the duty free allowance] can also be reduced by -30% (up to KW150,000/US$134) through voluntary reporting, so the burden is not high.”
Currently, the duty free limit per Korean national is US$600 (around KW670,000), and passengers can receive additional tax- and duty free benefits up to a carton of cigarettes, 1 litre of alcohol under US$400, and a 60ml fragrance.
Some 1,600 such passengers purchased from Lotte Duty Free in March, approximately three times higher than in December 2020 when non-landing tourist flights first began. March sales surged by +25% compared to the previous month, driven by heavy promotional activity held in association with the seven participating airlines, Lotte Duty Free.
Beauty category dominates sales while online share spikes
Cosmetics and fragrances were Lotte Duty Free’s dominant category across all channels in the first quarter, generating 45% of total sales, followed by fashion and leather with 29%, watches and jewellery at 12%, and alcohol and cigarettes with 5%.
A Lotte Duty Free spokesman said, “Before Corona, cosmetics and perfumes were 35% of total sales of Korean customers, and watches and jewellery were 5%. So we are selling a lot of watches, jewellery, bags, shoes etc.”
Online sales generated 60% of Lotte Duty Free’s sales in the quarter, followed by downtown shops with 36% and airport stores at just 4%. The retailer’s withdrawal from its liquor & tobacco operation at Incheon International Airport Terminal 1 in early March was a major factor in that low percentage. Currently, all flights for non-landing tourist flights are departing from Incheon International Airport T1
Gen Z consumers represented some 50% of shoppers, while females accounted for 56% of purchasers.
Innovative marketing and VIP charter flights drive spending
In mid-March 2021, Lotte Duty Free hosted an event that offered first-come, first-served, non-landing tour tickets to top customers of the Myeong-dong downtown store when purchasing more than US$550 of goods. The Air Busan flight that departed from Incheon on April 3 and 10 and returned over Japan’s Tsushima Island (the setting for the smash-hit PlayStation 4 game Ghost of Tsushima) received a strong response, with a total of 260 seats sold out across both days.
Passengers using these charter flights spent around KW1.2 million on average, on par with the standard non-landing flights, but customers over 40 accounted for 86% of the total while 62% were females. The shopping characteristics of VIP customers at Lotte Duty Free were “remarkable”, the retailer said. Fashion and leather was the top category, accounting for 56% of sales, followed by cosmetics and perfumes with 24%, liquor and cigarettes (6%), and watches and jewelry (4%).
Lotte Duty Free said that it is considering additional charter operations thanks to the enthusiastic support for the concept.
The travel retailer has also introduced a range of marketing activities such as giving airline affiliates money and free gifts, upgrading the membership level of Lotte Internet Duty Free, and hosting inflight prize draw events in connection with all seven Korean airlines that conduct non-landing tourism flights. At the end of April, Lotte Hotel and Asiana Airlines will launch a product that combines hotel accommodation, air travel and duty free shopping.
Lotte Duty Free partially reopens Gimpo and Gimhae airport stores to serve non-landing flights
Following the Ministry of Land, Infrastructure and Transport’s recent announcement that it would allow non-landing tourism flights at regional international airports such as Gimpo, Gimhae and Daegu airports from May, Lotte Duty Free, which has stores in Gimpo (Seoul) and Gimhae (Busan) airports is partially re-opening the shops in accordance with the planned flight schedules.
Lotte Duty Free Head of the Platform Business Division Lee Jung-min said, “Lotte Duty Free plans to continue to showcase various events based on the industry’s largest airline network to meet the duty free shopping demands of Korean customers.”
