While Large Duty-Free Shops Double in Growth... Small and Medium Duty-Free Shops Remain Stagnant

On the 7th, with winter rain falling, Chinese peddlers (Daigou) and foreign tourists are waiting to enter in front of a duty-free shop in Jung-gu, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Seungjin Lee] Last year, the duty-free shop industry recorded an all-time high sales of 24.8 trillion won. Although the market size more than doubled in three years, the sales gap between large corporation duty-free shops and small-to-medium-sized duty-free shops widened to nearly 22 trillion won.

According to the office of Kim Jung-woo, a member of the Democratic Party of Korea, large corporation duty-free shops recorded sales of 23.3973 trillion won. Compared to sales of 10.7802 trillion won in 2016, this more than doubled in three years. On the other hand, small-to-medium-sized duty-free shops have only seen stagnant performance. After recording sales of 953 billion won in 2016, they posted 942.5 billion won in 2017 and 970.4 billion won in 2018, showing slight increases. However, last year’s sales returned to the 2016 level at 953.7 billion won.

The sales gap between large corporations and small-to-medium-sized duty-free shops also widened significantly each year. The gap, which was 9.8272 trillion won in 2016, jumped to 22.4436 trillion won last year. The industry attributes this gap to internet duty-free shops. The internet duty-free sales of Lotte, Shilla, and Shinsegae have grown significantly each year. In 2018 alone, the internet duty-free sales of Lotte, Shilla, and Shinsegae exceeded 4 trillion won, accounting for 21% of total duty-free sales. As of June last year, the internet duty-free sales of Lotte, Shilla, and Shinsegae had already surpassed 3 trillion won and are expected to easily exceed the previous year’s sales of 4 trillion won.

Small-to-medium-sized internet duty-free shops are on the decline. Internet duty-free shops such as SM, Grand, and JTO all saw their internet duty-free sales decrease compared to the previous year in 2018. During the same period, Donghwa Duty-Free Shop, Korea’s first duty-free shop, saw an increase in internet duty-free sales, but last year’s internet duty-free sales are expected to either slightly decline or remain flat.

Regarding this, a representative from a mid-sized duty-free shop explained, "The number of consumers visiting internet duty-free shops continues to increase, but small-to-medium-sized duty-free shops cannot compete with large corporations that operate simultaneously on both online and offline platforms at scale," adding, "This polarization phenomenon will become more pronounced in the future and may even lead to discussions about their survival."

Meanwhile, the poor performance of small-to-medium-sized duty-free shops is expected to continue this year as well. SM Duty-Free Shop’s sales in the first half of 2019 fell by 12.7% compared to the same period last year. Previously, due to management difficulties in 2018, SM Duty-Free Shop reduced its downtown duty-free shop floors from seven to two. Donghwa Duty-Free Shop also saw its sales in the first half of 2019 drop by 20% to 149 billion won compared to the same period in 2018, with an operating loss of 10.5 billion won in 2018.

This content was produced with the assistance of AI translation services.