Duty-Free Store Closures and Entry Bans... How to Handle Trillion-Won Losses?

Partial Closure of Shilla and Lotte Duty-Free Shops Due to Novel Coronavirus
Daily Losses of at Least 10 to 20 Billion KRW
Recovery Not Easy Like During MERS in 2015

[Asia Economy Reporter Lee Seung-jin] Due to visits by confirmed cases of the novel coronavirus infection (Wuhan pneumonia), parts of Shilla Duty Free and Lotte Duty Free have temporarily closed. Furthermore, with the government imposing entry bans on foreigners who have visited Hubei Province in China, the number of Chinese visitors?who account for the majority of foreign duty-free sales?is decreasing, and the duty-free industry is expected to face a trillion-won scale decline in sales.

On the 3rd, a duty-free industry official stated, "In the case of duty-free shops in downtown Seoul, even a single day of closure results in a minimum sales loss of 10 to 20 billion won," adding, "If the entry ban on Chinese visitors expands due to the novel coronavirus, sales losses on the order of trillions of won are expected throughout February."

According to related industry sources, Chinese customers account for about 80% of foreign sales at duty-free shops. As of February last year, total foreign sales at duty-free shops amounted to 1.4 trillion won, with Chinese customers estimated to account for 1.1 trillion won of that. The total combined sales of domestic and foreign customers for the same month reached 1.7 trillion won.

Shilla Duty Free Seoul Branch, Jeju Branch, and Lotte Duty Free Jeju Branch, which were visited by confirmed cases, temporarily closed on the 2nd. Given the increasing number of confirmed cases, the number of stores temporarily closing is likely to rise. The Shilla Duty Free Seoul Branch, which closed temporarily on the 2nd, has an average daily sales volume of 8 to 10 billion won.

An interim closure notice has been installed at the entrance of Shilla Duty Free Seoul Branch, which began temporary closure from the 2nd following the confirmation of a visit by the 12th confirmed case of the novel coronavirus infection. Photo by Hyunmin Kim kimhyun81@

Shilla Duty Free is currently discussing reopening dates with health authorities, and the losses during this period are expected to reach at least several hundred billion won. The sharing of information about stores visited by confirmed cases through social networking services (SNS) is also fueling public fear, which is a concern. There are forecasts that anxiety will persist even after the novel coronavirus situation ends.

An official from the distribution industry explained, "Even after the Middle East Respiratory Syndrome (MERS) outbreak ended in 2015, the reduced customer foot traffic did not recover easily," adding, "It seems the same pattern will repeat this time, so we hope the novel coronavirus situation ends as soon as possible."

Previously, MERS took 69 days from the first outbreak in May 2015 until it disappeared. However, the government’s official declaration of its end was made at the end of December, and public anxiety lasted for a long time. The novel coronavirus, which had its first confirmed case on the 20th of last month, is currently on an upward trend in confirmed cases, so it is expected to take considerable time before it disappears.

According to the Korea Development Institute, department store sales in June 2015, during the MERS outbreak year, plummeted by 12.6% compared to the previous month. Large supermarkets also saw sales drop by 14.7%, with the entire distribution industry taking a direct hit. At that time, the estimated damage to the domestic tourism industry ranged from 2.65 trillion to 3.4 trillion won.

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