SOUTH KOREA. Duty free sales in South Korea rose by +38% year-on-year in the first half to KW9.1994 trillion (US$8.1 billion), according to Korea Customs Service.
The figures, confirmed by The Moodie Davitt Report with two leading travel retailers, were driven by a sharp bounce back in Chinese tourism in recent months. As reported, Chinese visitor arrivals to South Korea rose +49% year-on-year in June to 379,891, continuing the robust recovery from the 2017 THAAD crisis, according to Korea Tourism Organization (KTO).
While still a long way off the pre-THAAD June 2016 record of 758,534, those results continue an encouraging pattern expressed in a +60.9% increase in April and a +46.1% rise in May. Chinese tourism slumped drastically after the 17 March, 2017 crackdown on group tours to South Korea.
The first-half duty free sales figure was made up as follows:
- KW7.47 trillion (US$6.6 billion) by foreigners (KW0.64 million from each customer) and KW1.73 trillion (US$1.5 billion) by Koreans (KW0.14 million from each customer)
- Sales hit KW1.6017 trillion (US$1.4 billion) in June, a leap of +46.7% compared to 2017 June, with sales from foreigners climbing by +61.9% and by +13.6% among Koreans
The huge increase in sales is also being driven by the daigou (shuttle trader) phenomenon. The trade involves hundreds of thousands of Chinese shoppers purchasing Korean and international duty free goods for customers in Mainland China at well below prevailing Chinese domestic prices and then reselling them.
Korean duty free sales hit KW14.4684 trillion (US$12.8 billion converted at today’s rate) in 2017, but are forecast to soar by over +25% to KW18.4 trillion (US$16.3 billion) in 2018.
However it’s not all good news, according to one seasoned Korean travel retail executive. “Actually the June sales amount was down from May by a single-digit percentage which means the market’s over-dependency on the Chinese indirect business (daigou shoppers) is being saturated,” he said. “The recent weakening Yuan and toughened China Customs’ control over such shuttle traders are gradually eroding KDF competitiveness. And three more Seoul downtown store openings this year means competition becomes more expensive and the market moves to saturation point at a higher speed.”
