SOUTH KOREA REPORT: OVERVIEW
According to industry figures, some 20.6m foreign visitors bought duty free products last year in South Korea, a rise of 28% compared with 2015.
TRBusiness
cosmetics brands are Sulwhasoo and The History of Whoo. Lotte Duty Free, the country’s leading operator with total sales of $5.7bn last year, saw its perfume and cosmetics sales reach almost $3bn last year in its various downtown and airport stores. Hotel Shilla Duty Free with total
free operators that changes made to China’s luxury goods import regulations in April 2016 would cause a reduction in individual spending. [In April the Chinese government raised import tariffs on luxury goods that exceeded official government duty free limits-Ed.] According to industry figures,
some 20.6m foreign visitors bought duty free products last year in South Korea, a rise of +28% compared with 2015. In addition, some 27.9m South
Korean travellers bought duty free goods last year, registering an increase of +13.6% compared to the previous year.
South Korean SPH slows Although individual spending by foreign visitors increased last year, per capita South Korean customer spending slowed slightly in 2016. Total South Korean duty free purchases rose +9.8% in value. Perfume and cosmetics is South
Korea’s largest duty free category accounting for more than 50% of duty free sales. South Korean cosmetics brands
have increased in popularity in recent years among Chinese visitors and now account for an estimated 60% of total perfume and cosmetics sales. International brands account for about 40% of cosmetics sales, but this ratio does differ from retailer to retailer. The top two selling South Korean
sales of $2.6bn in 2016 (not including its HDC Shilla I’Park Duty Free joint venture in Seoul) also saw perfume and cosmetics account for a large portion of its revenue. Other South Korean duty free
operators also reported strong sales of cosmetics, as did newcomers to the duty free market. Interestingly, new operators also reported that they had found it easier to arrange supply deals with local cosmetics manufacturers than international brand suppliers. The coincidence proved convenient
for new operators who filled empty retail space in their downtown stores with less well-known South Korean cosmetics brands, which were of great interest to Chinese customers, many of whom are looking for South Korean brands. Other leading operators include
Shinsegae Duty Free which posted total sales of $660m at its downtown and airport shops in Seoul and Busan. Shinsegae (featured on p115) registered an impressive six-fold increase in daily sales last year at its new flagship Shinsegae Duty Free Myeongdong downtown store in Seoul.
Changing age profile Revenue rose from US$500,000 daily after opening on 18 May, 2016, to reach US$3m per day in mid-December. The HDC Shilla I’Park Duty Free
shop in Seoul registered sales of $345m in its first full year of operation while Dongwha Duty Free, an SME operator that opened the first downtown shop in Seoul, reported sales of about $300m in 2016. It has become clear that although
Sales in South Korea have already been impacted this year. 90 TRAVEL RETAIL BUSINESS
2016 was a very successful year for South Korea’s duty free operators, these same companies face a number of challenges in 2017 in addition to uncertainty over the number of Chinese visitor arrivals [referred to earlier].
Lotte famously reopened its World Tower store this year.
The age profile of foreign tourists visiting South Korea is changing with women aged 20-30 now making up a growing share of customers visiting duty free shops in South Korea. According to the operators
speaking to TRBusiness in this Annual South Korean market report [p89- 135], these younger customers are looking for South Korean cosmetics and fashion brands which they already are familiar with. Operators are also adapting to
the growing popularity of online shopping which has developed quickly in recent years and is expected to reach about 50% of downtown shop revenue in the near future [at current growth rates]. After launching online shopping
services for South Korean customers initially, most operators have now added Chinese language services which have boosted revenue considerably as Internet shopping is especially popular among Chinese customers. However, online duty free
shopping is currently restricted to downtown duty free shops and cannot be offered by airport shops under Korea Customs Service regulations. However, Incheon International
Airport is currently looking at possible ways of launching a common online shopping platform for all its concession holders. «
MAY 2017
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