SOUTH KOREA. Influential business media title The Korea Economic Daily has responded to The Moodie Davitt Report’s recent ranking of the world’s top travel retailers based on 2023 sales, saying it underlines the woes of the Korean duty-free market – historically the world’s biggest.
As reported, the two Korean travel retail powerhouses Lotte Duty Free and The Shilla Duty Free ranked fourth and six in the benchmark league. Shinsegae Duty Free came in eighth and Hyundai Duty Free 13th.
“Before COVID-19 swept the world, South Korea’s top two travel retailers Lotte Duty Free and Shilla Duty Free Shop ascended to the world’s number two and number three spots by sales in 2019 [in our pre-pandemic rankings -Ed] but hopes of repeating that past glory seem far over the rainbow,” wrote reporter Jae-Kwang Ahn.
“Betraying their euphoric expectations, Chinese tourists’ return to Korea has failed to rejuvenate the Korean duty-free retail industry, largely due to the absence of lavish Chinese spenders who used to gobble up expensive cosmetics and luxury brand items before the pandemic.”
The article failed to mention the biggest factor in declining sales, the sweeping Korea Customs Service crackdown on bulk reselling from early 2023.
The Korea Economic Daily also highlighted the plunging profits felt by Korea’s big four in the first half of 2024, as revealed by The Moodie Davitt Report recently.
Lotte Duty Free’s performance plummeted -211% to an operating loss of KRW46.3 billion (US$34.6 million) in the first six months of this year from a year ago, while The Shilla Duty Free and Shinsegae remained marginally in the black despite heavy year-on-year declines (see table below).
The Korea Economic Daily lay the blame squarely on changing spending habits of Chinese travellers. Korea received about 7.7 million foreign visitors in the first half of this year, up +73.8% from the same period last year, it said. Of the total, 41% were from Mainland China, Hong Kong, Macau and Taiwan.
“But Chinese tourists did not spend much on luxury items during their visits to Korea unlike those who were not hesitant to open their wallets for expensive goods before the pandemic,” the report said.
The extreme weakness of the Japanese Yen in the first half (it has weakened considerably since 10 July) has also been a big factor in Korean travel retail’s woes with many Chinese big spenders opting for Japan over Korea to shop for expensive duty-free items, the report said.
“Over the past five years, the Yen weakened about -40% against the Chinese Yuan, but the Korean Won fell about -15%, making the same luxury items sold in Japan cheaper and more attractive with Chinese money than those in Korea.”
The report also noted a change in Chinese tourists’ shopping trends when they visit the Republic. “Before the COVID-19 pandemic, Chinese travellers spent heavily on high-end Korean cosmetics products from the country’s household names such as LG H&H Co. and Amorepacific Corp,” Ahn wrote.
“Now many Chinese tourists chase after bang for the buck offered by smaller Korean cosmetics brands such as Mediheal, Clio Cosmetics, Dr.G and Rejuran.”
Ahn also highlighted the Chinese government’s new policy to allow pre-departures downtown duty-free shops, open to Chinese and foreign travellers, from October.
“The outlook for the Korean duty-free shopping industry looks grim as Beijing has vowed massive state support to nurture the country’s travel retail industry,” the report concluded. ✈
