SOUTH KOREA: OVERVIEW


South Korea beats the odds to score $12bn in tumultuous year


Double-digit growth appears to be the target for the world-leading duty free industry this year, but while Beijing-Seoul diplomatic relations appear to be improving, reduced- profitability troubles operators after a 20% sales rise in 2017. David Hayes reports.


Above: Lotte Duty Free's hugely popular Star Avenue at its downtown store will face competition with three new shops scheduled to open this year.


T


he past 15 months has been a remarkable period for South Korea’s amazing duty free


industry, which against the odds recorded double-digit revenue growth in 2017. This was despite the sharp fall in


Chinese visitor numbers after Beijing banned group tours in retaliation for Seoul’s decision to install the US-supplied THAAD missile defence system. Although Chinese visitor numbers


plunged by over 50% after Beijing issued its group tour ban in March 2017, South Korea’s duty free industry achieved a massive $2.2bn increase to reach total sales of $12.8bn last year, a rise of +21% compared to revenue in 2016. Perfume and cosmetics is the duty free sector’s largest category,


Although Chinese visitor numbers plunged by over 50% after Beijing issued its group tour ban in March 2017, South Korea’s duty free industry achieved a massive $2.2bn increase to reach total sales of $12.8bn last year, a rise of 21% compared to revenue in 2016.”


TRBusiness 84 TRBUSINESS


accounting for an estimated 50% share of sales. After South Korean beauty product sales caught up and overtook international brands in the past two years, operators say demand for imported brands is growing again as Chinese customers focus more on colour make-up products, for example. Fashion, watches and jewellery


remain the second largest category, with luxury watches and bags continuing to enjoy strong sales. South Korea’s high tobacco taxes


ensure strong demand for cigarettes in the country’s airport shops with e-cigarette sales growing fast. South Korea’s top three duty


free operators registered combined sales of $10bn in 2017, accounting for 80% of the country’s total duty free earnings that year, a proportion similar to the previous year. Lotte Duty Free is South Korea’s


largest duty free operator, with total domestic sales of $5.4bn in 2017, up 3.8% compared with $5bn the previous year. The Shilla Duty Free, the country’s


second largest duty free operator, achieved total domestic revenue of $3bn in 2017, up 20% compared with $2.5bn the previous year.


Third placed Shinsegae Duty Free


recorded revenue totalling $1.6bn in 2017, the company’s first full year of duty free sales. Growth prospects are bright after


a flying start to 2018, with leading duty free operators reporting a Q1 double-digit upturn.


Top three eye $12bn South Korea’s top three operators all are targeting double-digit growth this year that will see their combined sales reach almost $12bn, if achieved. For South Korea’s total duty free


market as a whole, a +10% revenue increase would see total duty free sales pass $14bn this year, while a similar 20% rise to last year would lift sales over $15bn. Optimism over further growth is


also rising as contact between North and South Korea continues to warm. In addition, improved diplomatic


relations between Seoul and Beijing has raised optimism that China will ease group tour restrictions around mid-year, allowing mainland visitor numbers to return to normal. Foreign visitor purchases


amounted to $9.5bn in 2017, accounting for 74% of South Korea’s total duty free revenue, a figure


MAY 2018


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