Louis Vuitton, Pulling Out of Downtown Duty-Free Shops Due to Customer Dissatisfaction?

Louis Vuitton store (Photo by Asia Economy DB)

[Asia Economy Reporter Kim Yuri] The French luxury brand Louis Vuitton has decided to withdraw from domestic downtown duty-free shops. Industry experts analyze that Louis Vuitton is reshaping its global strategy in the post-COVID era by focusing on China and airports, while simultaneously attempting to discipline the domestic distribution industry.

On the 3rd, the UK duty-free distribution specialist publication Moody Davitt Report reported that Louis Vuitton plans to close most of its stores in Korean downtown duty-free shops. The reason given is that Korean downtown duty-free shops heavily rely on daigou (Chinese personal shoppers). It is said that the downtown duty-free shops are being closed to prevent damage to the brand's value. Louis Vuitton stores in domestic downtown duty-free shops include four locations in Seoul: Lotte Duty Free Myeongdong Main Store, Lotte World Tower Duty Free, Shilla Duty Free Seoul, and Shinsegae Duty Free Myeongdong Main Store; as well as three other locations: Lotte Duty Free Busan, and Lotte and Shilla Duty Free in Jeju, totaling seven stores.

The domestic duty-free industry appears to be taken aback. The industry collectively remains cautious, stating, "While there is indeed a change in Louis Vuitton's global policy, the timing and scale of withdrawal have not yet been decided." Analyst Park Eun-kyung of Samsung Securities predicted, "The luxury brand sales dependency of the domestic duty-free industry was in the mid-teens percentage range as of 2019, before COVID-19. The impact of Louis Vuitton's withdrawal from downtown duty-free shops on industry sales will be minimal."

Some argue that citing the high sales proportion from daigou is merely an excuse, as this has not been a recent development. Even before the COVID-19 pandemic, daigou accounted for 70% of downtown duty-free shop sales, and over 50% when including airports and department stores. Currently, the daigou proportion has risen to about 90%, but this is due to special circumstances such as travel bans caused by COVID-19, making it an inappropriate reason for Louis Vuitton's withdrawal from downtown duty-free shops.

Rather, it is analyzed as a measure to adjust the number of stores by region to strengthen presence in China and airport duty-free shops. Louis Vuitton plans to open stores in six airports in China by 2023. Recently, it has also been expanding product sales through its official online website. Therefore, the decision to exit domestic downtown duty-free shops to protect brand value is seen by some as part of an effort to discipline the distribution industry, targeting department stores with high luxury brand dependency.

An industry insider said, "Due to Louis Vuitton's influence, other luxury brands may also decide to withdraw their stores, so we are watching closely," adding, "After expanding downtown duty-free shop volume, the ongoing effects of COVID-19 have led to significant concerns regarding post-COVID responses."

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