NEWS ROUND-UP South Korea DF&TR targets +20% growth in 2018


South Korea’s duty free industry is targeting double-digit revenue growth this year following record sales in 2017 despite the sharp decrease in Chinese group tour numbers,


TRBusiness


reliably understands. Warming relations between Seoul and


Beijing have raised hopes for an ease in tensions over the THAAD missile crisis, which could lead to a gradual increase in mainland tourist arrivals in South Korea over the next 12 months. In addition, three new downtown duty


free shops are scheduled to open in Seoul this year, adding even more shopping destinations to South Korea’s already unrivalled collection of downtown luxury duty free stores. “This year, total Korean duty free


sales should increase by more than 20% since China’s sanction on visits to South Korea will loosen during the first half,” commented a well-connected industry source in Seoul. “Normal Chinese conducted tours


will start to return; individual Chinese FIT numbers will rise as well. “Also, new downtown duty free stores


– Shinsegae Gangnam Duty Free, Hyundai COEX Duty Free and City Plus Duty Free Sinchon will open in the second half; they will affect the market from later this year. “Newly expanded Incheon Airport


Terminal 2 will be a good factor to raise footfall to South Korea as well. “Although the operating profit will not


improve much, overall market conditions will be much better than in 2017.” South Korea’s


duty free industry


registered a $2.2bn sales increase in 2017, a rise of 21% compared to total revenue recorded last year.


Building on $12.8bn Duty free industry expectations that sales will rise by 20% in 2018 would add between $1.9bn to $2.5bn to South Korea’s total duty free revenue this year, assuming foreign visitor numbers rise


as expected. Foreign visitor purchases amounted to


$9.5bn in 2017, accounting for 74% of South Korea’s total $12.8bn duty free sales last haul year. This figure includes all airport, seaport,


downtown shops (including on-line sales) and domestic duty free sales on Jeju Island, but excludes airline inflight sales. South Korean travellers’ share of sales


totalled $3.3bn, equivalent to 26% of total duty free revenue. Of total South Korean purchases, $525m or about 14% were domestic duty free purchases on Jeju Island where domestic duty free sales rose by 2.6% in 2017. “Last year all Korean duty free retailers


suffered from the THAAD dispute with China, even this year we are still suffering,” said the source. “We expect a gradual improvement


since the new government in South Korea is trying to relieve the stalled situation and the Chinese government has expressed the desire to lift the ban on group tours to Korea. The THAAD impact will still linger to March or April this year.” Total downtown duty free sales rose 28% to reach $9.8bn in 2017. However,


downtown duty free stores in Busan that rely on South Korean customers recorded a sales fall in 2017, as did Lotte Duty Free’s Sogong flagship store and Lotte COEX stores in Seoul that were hit by a fall in Chinese group tour customers. Total airport and seaport sales of $2.4bn


were almost flat in 2017, reaching $2.4bn, an increase of 1.7% over the previous year, as fewer Chinese travellers visited airport duty free operators. Meanwhile, low operating profits are


a major concern for South Korea’s duty free players. Beijing’s decision to restrict group tours


to South Korea in response to the THAAD missile system crisis has coincided with a sharp increase in shopping visits by FIT Chinese travellers who buy in bulk for resale on return to China. Known as Daigou in China, the illegal


traders’ bulk buying helps South Korean duty free retailers turn over stock during the current difficult trading period. However, purchase prices paid are low


and South Korean operators are reportedly forced to pay high commission fees to travel companies for bringing Daigou traders to their downtown stores.


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