SOUTH KOREA. Duty free sales in South Korea grew +14.3% year-on-year in January to US$1,743 million, but the COVID-19 outbreak started to impact sales in the final week of the month. The real impact of the health crisis on monthly duty free sales will begin to show in February. Korea’s tourism industry and duty free sales began to decline sharply in the last week of January.
The growth in January sales came primarily from sales to foreigners (mainly Chinese), which rose +21.1% year-on-year to US$1,465 million. Sales to Koreans continued to decline, falling -12% year-on-year to US$278 million.
According to data published by Korea’s Ministry of Justice, duty free sales declined by -40.4% in the third week of February and Chinese arrivals plunged by -80.4% in the same period. The surge in new cases of COVID-19 in Korea in the last week of February will result in further deterioration for the month.
Daigou resellers (and in particular their purchase of high-value luxury cosmetics) are the main reason duty free sales have continued to fare so strongly in recent years. Senior sources in the beauty sector spoken to by The Moodie Davitt Report believe that the daigou sector will be a rare – and vital – ray of light in the stricken Asian travel retail sector over coming months.
“The demand in China for product hasn’t gone down because of the crisis, in fact it’s gone up,” said one leading travel retail executive. “The problem is that the daigou have been too scared to go to China because of the COVID-19 outbreak.” South Korea has an excellent health system and if the outbreak can be brought under control, then the daigou business will quickly bounce back, he added.
However, The Moodie Davitt Report understands this positive sentiment is not industry-wide: while luxury western brands are outperforming the market, their Korean counterparts are seeing sales declines of up to -80-90%.
