COVID-19 Devastation... Duty-Free Shop Sales Halved

February Sales 1.1025 Trillion KRW
46% Sharp Decline from Previous Month
Visitor Count Down 55%

Lotte Duty Free temporarily suspended operations at the international terminal duty-free store of Gimpo International Airport on the 12th. This decision was made due to the sharp decline in flights and passengers at Gimpo Airport caused by the global spread of COVID-19. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Seungjin Lee] Due to the impact of the novel coronavirus infection (COVID-19), domestic duty-free shop sales in February plummeted by nearly half compared to the previous month. The situation in March is expected to be even more difficult, which is likely to increase calls for rent reductions at airport duty-free shops.

◆ February sales halved = According to the Korea Duty Free Shop Association on the 27th, domestic duty-free shop sales in February amounted to 1.1025 trillion KRW, a sharp decline of about 46% compared to the previous month. The number of visitors in February was approximately 1.754 million, down about 55%. The situation is the same for airport departure duty-free shops. February sales were 128.5 billion KRW, down about 53% from the previous month, falling more sharply than the average sales decline across all duty-free shops.

In January, despite the impact of COVID-19, sales held up well at the 2 trillion KRW level, so there was little concern. However, sales sharply declined from February, and March has continued in a state of near closure. A duty-free industry official said, "As the impact of COVID-19 intensified, the entry of Chinese group tourists, who are the core customers of duty-free shops, significantly decreased," adding, "Due to the COVID-19 pandemic, global travel demand has completely disappeared, and difficulties are expected throughout the first half of the year."

March is difficult to even predict. With virtually no customers, sales are expected to drop by more than 80% compared to January. According to Incheon International Airport Corporation, the number of travelers using Incheon International Airport last year was about 180,000 to 220,000 per day on average. However, recently, including Terminals 1 and 2, the daily average has dropped to about 5,000, meaning customers have virtually disappeared.

On the 25th, mid-sized duty-free operator SM Duty Free Shop returned its license for a downtown Seoul duty-free shop. This is the first time a duty-free operator has returned a license since the COVID-19 outbreak. At Incheon Airport, some small and mid-sized duty-free shops failed to pay rent for February. SM Duty Free Shop, which operates two departure duty-free shops and one arrival duty-free shop, failed to pay about 3 billion KRW in rent. Grand Duty Free Shop, which operates one departure duty-free shop, also failed to pay February rent by the deadline on the 25th.

◆ Risk of mass bankruptcies if rent reductions are not implemented = Facing the worst situation in history, the duty-free industry is raising its voice again for rent reductions at airport duty-free shops. As the damage caused by COVID-19 spread, the government announced a three-month interest-free rent payment deferral for Incheon Airport duty-free shops.

However, this applies starting from March rent, and since airport passenger numbers are expected to sharply decline throughout the first half of the year due to the COVID-19 pandemic, it is unlikely to provide practical help. Ultimately, the real solution is a direct rent reduction. There are also calls to expand the government's support for airport duty-free rent reductions, which is currently limited to small and medium-sized enterprises, to include large corporations.

Last year, among the total 1.0761 trillion KRW in rent paid by Incheon Airport duty-free shops, large corporations accounted for 91.5% (984.6 billion KRW). Large corporations also pay 66.5% of the total airport rent.

An industry insider said, "Incheon Airport requires bidders to offer rent based on PAX (passenger numbers) above a minimum rent, but the PAX, which is the basis for the minimum rent, has plummeted," lamenting, "As a result, rent is becoming higher than sales."

The insider explained, "For Incheon Airport duty-free shops, monthly sales were usually around 200 billion KRW, and rent was about 80 billion KRW, but in March, sales are expected to drop to 40 billion KRW, an 80% decrease," adding, "Meanwhile, rent remains at 80 billion KRW, meaning they have to pay twice their sales amount in rent."

According to these claims, losses for Incheon Airport duty-free operators are expected to exceed 100 billion KRW in March alone.

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