SOUTH KOREA: INTRODUCTION


South Korea predicts $20bn in duty free sales for 2019


Leading duty free operators in South Korea are predicting US$20bn in sales across the entire market in 2019, following strong Q1 double-digit revenue growth. However, David Hayes also discovers that heavy discounting and low profitability continues to trouble operators.


Above: South Korea’s downtown stores, such as this one operated by The Shilla Duty Free in Seoul, are feeling the pressure as competition intensifies.


S TRBusiness Duty free sales rise +35% to $17.2bn in 2018


Total duty free sales in South Korea rose by an impressive 35% in 2018 to reach a record $17.2bn, according to duty free industry figures including domestic duty free sales in Jeju (excluding inflight sales). Purchases from foreign visitors amounted to 79% of the total, while


South Korean traveller purchases, including domestic duty free shop sales in Jeju, represented 19% of total revenue last year. Perfumes and cosmetics is the best-performing category and


The Shilla Duty Free departure shop at Jeju Airport. 76 TRBUSINESS


accounted for about 55% of total duty free sales in 2018. Sales of international and South Korean brands remain about equal after rapid growth in Korean K-beauty products in recent years.


MAY 2019


outh Korea, the world’s largest duty free market, believes US$20bn in sales is


a realistic target for calendar year 2019. This


owes to reports from


leading operators that claim to have registered revenue growth in double digits in the first few months of this year. A 30% increase in Chinese visitors


to the region in January and February instantly boosted duty free shops’


A 30% increase in Chinese visitors to the region in January and February instantly boosted duty free shops’ revenues, helped also by higher Japanese and Southeast Asian tourist numbers.


revenues, helped also by higher Japanese and Southeast Asian tourist numbers. In addition, the number of outbound South Korean travellers rose almost 7% as more of them choose to holiday abroad. Operators must have been


pleasantly surprised by the sales boost in Q1, as it coincided with the introduction of a new e-commerce law (January) in China. The law aims to regulate and restrict daigou traders, who sell a wide range of merchandise through the Internet including duty free goods bought overseas for re-sale in China. Downtown duty free store


operators, who initially feared an impact to sales following the


introduction of the new law, say the new regulations have not yet affected business. Industry figures show that


downtown duty free shops, including their online shopping services, account for 84% of South Korea’s total duty free revenue.


Operators face risks According to duty free executives contacted for this exclusive TRBusiness South Korea report, daigou customers’ purchases represent an estimated 80% share of most downtown duty free store revenues, highlighting the risk operators face through exposure to Chinese Government policy changes.


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