Big Spenders Daigong Blocked...? Duty-Free Industry Anxious Over End of Third-Party Returns

Record High Single Foreign Visitor Duty-Free Spending in November
Chinese Customers Account for 93% of Total Sales

Government Denies Extension of Third-Party Returns... Ending Next Year
Industry: "Competition to Attract Daigou Will Intensify"

Incheon International Airport Terminal 1 departure hall is deserted due to the impact of COVID-19.
Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Seungjin Lee] The government’s temporary allowance of 'third-party overseas forwarding' for duty-free shops, which were hit hard by the novel coronavirus infection (COVID-19), is coming to an end in one day. Although duty-free shops repeatedly requested an extension of the related measure, the government maintained its refusal. The true face of duty-free shops, which have no choice but to rely on Chinese peddlers called Daigong, is being revealed, deepening concerns.

According to the Korea Duty Free Shop Association’s industry trends on the 30th, the average spending per foreigner at domestic duty-free shops reached about 20.53 million won last month, marking an all-time high. This is nearly double compared to 11.41 million won in November last year, before the COVID-19 outbreak. On the other hand, the number of foreigners using duty-free shops last month was 65,655, which is about one-thirtieth compared to 1.72 million in the same period last year.

Despite the sharp decrease in tourists, the reason for the increase in duty-free product purchases is third-party overseas forwarding. This system allows foreigners to purchase duty-free goods directly overseas without visiting Korea. According to the duty-free industry, third-party overseas forwarding has revitalized the sales of duty-free shops on the brink of collapse. This is the result of competitively attracting Chinese peddlers called Daigong.

Total sales, which were 986.7 billion won in April, exceeded 1 trillion won in May and recovered to 1.4195 trillion won last month. Along with this, the proportion of Chinese customers in total duty-free sales also increased from 75% in 2018 and 82% last year to 93% this year. In fact, the operation of duty-free shops has reached a point where it is impossible without Daigong.

The government allowed multiple shipments of goods by foreigners who entered the country but maintains that an extension of third-party overseas forwarding is impossible. In particular, concerns about market disruption grew as not only Chinese Daigong but also some international students sold duty-free goods cheaply in the domestic market instead of China, leading to the rejection of the extension request after careful consideration.

In response, the duty-free industry argues that multiple shipments are ineffective as foreign entry will remain difficult next year due to the recent emergence of COVID-19 variants in the UK and the subsequent closure of air routes. There is also a forecast that the end of third-party overseas forwarding will rather increase dependence on Daigong.

A duty-free industry official explained, "Shouldn’t we first try to save an industry worth tens of trillions of won?" and added, "If third-party overseas forwarding ends next year, competition to attract Daigong, a major source of sales, will intensify, inevitably increasing duty-free shops’ dependence on Daigong."

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