Q1 tourism shopping surges for Shinsegae – but department stores rather than duty free prove main beneficiary : Moodie Davitt Report

K-pop-up: Shinsegae Duty Free fused K-culture, K-pop and K-beauty with a pioneering immersive retail experience at its Myeong-dong, Seoul store last month, bringing together global content sensation Kpop Demon Hunters with leading K-beauty brand Anua for a limited-time pop-up. “We believe this collaboration reflects the growing convergence of content, culture, and commerce – particularly within the global Gen Z audience,” a Shinsegae Duty Free spokesperson told The Moodie Davitt Report.

SOUTH KOREA. Duty-free profitability continued to improve for Shinsegae in the first quarter but the real story lies in an extraordinary surge in tourist shopping (predominantly Chinese) at the company’s key department stores in Seoul and Busan.

In a performance that reflects a key and growing channel shift within the country’s tourism-related retail sector, Shinsegae Department Store posted a remarkable +90% year-on-year increase in sales to tourists during the quarter.

The Myeong-dong flagship (Shinsegae Duty Free is housed in the same building) posted an even more stellar +141% increase year-on-year in sales to foreigners – generating a hugely significant 28.4% of revenue over the three months.

*The Korea Herald*-run *The Investor* highlights the surge in tourist-related department store shopping. Click on the image to read.

Shinsegae Duty Free was in the black for the second successive quarter with the division returning a modest KRW10.6 billion (US$7.1 million) operating profit. Duty-free sales rose +5.0% year-on-year to KRW590 billion (US$393.3 million)

Profits were driven by what the company called an “improved discount rate structure” – a reference to lower daigou-related travel agency commissions. Conversely, higher passenger traffic at Incheon International Airport pushed concession fees up as the interim Terminal 2 rent reduction programme expired on 14 January.

Profitability improvement is expected to accelerate following the recent closure of the heavily loss-making Incheon International Airport DF2 operation.

Note the focus (below) on tourist customers within Shinsegae’s department store portfolio and the outstanding April performance (above). All graphics courtesy of Shinsegae, click on images to expand.

As reported, Shinsegae Duty Free officially exited that perfumes, cosmetics, liquor and tobacco concession on 27 April, having served notice to quit last year due to mounting operational losses.

As with peer The Shilla Duty Free (DF1), the company did not table a bid in the subsequent tender, with the contracts being awarded to Lotte Duty Free (DF1) and Hyundai Duty Free (DF2), respectively.

Key department stores, including Myeong-dong, Jamsil and Gangnam in Seoul and Centum in Busan, all prospered on the back of the tourist surge, with sales to foreign visitors accounting for 6.9% of revenue or KRW139,932,000,000 (US$93.17 million).

A department store as a K-pop-driven tourist attraction: In March, a dazzling time signal video commemorating blockbuster boy band BTS’s comeback was featured at Shinsegae Department Store’s main branch, Shinsegae Square. The building also houses Shinsegae Duty Free.

One leading luxury brand executive told The Moodie Davitt Report that tourist sales at leading Seoul department stores are larger than in their downtown duty-free equivalents this year. ✈

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