July Duty-Free Store Sales 1.25 Trillion Won... Gradual Recovery Driven by Chinese Daigou

Increase in Fees such as Korea-China Self-Quarantine Costs
Positive Impact of Reduced Rent Burden at Incheon Airport

[Asia Economy Reporter Minyoung Cha] In July, the domestic duty-free industry in Korea continued its sales recovery for the fourth consecutive month, supported by the rebound in the Chinese economy and demand for duty-free inventory products from domestic customers. However, rising intermediate costs have made it difficult to translate this into improved profitability.

According to the Korea Duty Free Association on the 28th, total sales at domestic duty-free shops in July reached 1.2516 trillion KRW, an increase of approximately 138.6 billion KRW (12.5%) compared to June's 1.113 trillion KRW. This marks a rebound trend following the break of the 1 trillion KRW barrier in April (986.7 billion KRW).

Sales to foreign customers this month were 1.2021 trillion KRW, up 135.6 billion KRW from the previous month (1.0665 trillion KRW). The number of foreign customers also increased by about 2,100. Domestic sales also rose by 4.95 billion KRW to 49.5 billion KRW from 46.5 billion KRW in the previous month.

The relatively large increase in sales to foreigners was mainly driven by the volume of Chinese "daigou" traders. With the allowance of re-export to third countries and greater freedom of movement, daigou traders, supported by the recovery of China's domestic market, have increased their purchases of cosmetics. However, due to the time and financial costs associated with mandatory quarantine and other intermediate commission fees, improving profitability in the domestic duty-free industry remains challenging.

Domestic sales reflected demand from summer peak season visits to Jeju Island starting in May, contributing to sales at the JDC Duty Free Shop in Jeju International Airport. Sales from temporary long-term inventory domestic sales permitted by the Korea Customs Service also contributed partially. Since these sales primarily aim to dispose of over three years of stagnant inventory, they are sold at 50-70% discounts with minimal profit, resulting in low contribution to duty-free shop profits.

A representative from a major domestic duty-free company said, "With mandatory quarantine in place, the commissions paid to daigou traders have increased compared to the past. However, Incheon International Airport Corporation recently linked the rent for commercial facilities in the airport passenger terminal to the passenger decline rate and extended the four-month payment deferral period, which is expected to significantly reduce fixed costs."

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