Korean duty-free shops’ sales fell 19 percent in March from a month earlier due to China’s retaliation against Korea’s deployment of a U.S. antimissile system. Overall sales in domestic duty-free stores fell to 1.06 trillion won (US$930 million) in March from the previous month’s 1.305 trillion won.
Sales at Korean duty-free stores by foreign tourists in March fell 29.2 percent compared to a year earlier to US$170 million, and the number of visitors from China also fell nearly 40 percent compared to the previous year.
Sales in Lotte Duty Free, which is the nation’s largest and the world’s third-largest duty free retailer, declined by more than 30 percent following the ban. They expected to see its largest sales decline since it suffered its first drop in 2003 when the Severe Acute Respiratory Syndrome (SARS) broke out in China.
The customs office expected local duty-free shops to report worsening sales results in the coming months as China is likely to continue its economic sanctions for the time being. It will have an impact on the bottom lines of duty-free shops, particularly those in Seoul, as they used to earn 70 to 80 percent of their sales from Chinese travelers. Other tourists from Japan and Southeast Asian contribute to about 5 percent of sales.
To minimise the impact, duty-free shop operators have asked the government to temporarily raise the upper limit of purchases by Korean travelers at the shops, increase tax benefits for customers and lower their rental payments for shops at Incheon International Airport.
Shinsegae Group and Hyundai Department Store, originally scheduled to start operations by December of this year, may consider delaying their opening dates. The retailers have begun preparing for the launch but they need more time to adjust their strategy to accommodate a decline in tourism from China.
(Source: Korea Joongang Daily)