Duty-Free Shop Sales Decline for Two Consecutive Months Due to Delta Variant... Seeking Domestic Market Breakthrough

On the 29th, the duty-free shop at Terminal 1 of Incheon International Airport is quiet due to the impact of COVID-19. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yuri Kim] Due to the spread of the COVID-19 Delta variant, domestic duty-free shop sales have declined for two consecutive months. The industry is seeking breakthroughs in the domestic market amid restricted international travel, but with foreign customer sales accounting for an overwhelming proportion, fundamental solutions have yet to be found.

◆Sales Decline for Two Consecutive Months

According to the Korea Duty Free Shop Association on the 2nd, domestic duty-free shop sales in July amounted to 1.3167 trillion KRW, down 2.3% from 1.3479 trillion KRW in June. In May, sales reached 1.5687 trillion KRW, marking the most improved figure since the outbreak of COVID-19, but the resurgence of the virus has once again hindered progress.

Both foreign and domestic visitors decreased in July compared to the previous month. Foreign visitors numbered 51,199, down 18.1% from 62,499 in June. Domestic visitors also sharply dropped by 23.2%, from 530,873 in June to 407,619 in July. Foreign sales, which constitute a large scale, decreased by 1.32% from 1.2804 trillion KRW to 1.2635 trillion KRW, while domestic sales fell 21.2% from 67.5 billion KRW to 53.2 billion KRW.

In July, the overall atmosphere was heavily affected by the expansion of social distancing measures due to the COVID-19 resurgence. The industry explained that foreign sales still heavily rely on Chinese daigou (personal shoppers), and the cluster infection at Jeju Airport duty-free shop also dealt a blow to domestic visitors and sales.

Domestic duty-free shop sales have been stuck at a monthly sales level of 1 to 1.5 trillion KRW since last year. This is a significant contraction compared to January last year, just before entering the COVID-19 impact zone, when sales were 2.0248 trillion KRW.

◆Seeking Breakthroughs Amid COVID-19

The duty-free industry is seeking breakthroughs by expanding sales channels for domestic inventory duty-free goods while preparing for the post-COVID era by reorganizing both online and offline operations. Although the sales proportion of inventory duty-free goods is limited, the industry is actively exploring all possible measures to expand sales at the industry level.

Shilla Duty Free expanded consumer touchpoints by entering Coupang last month and Samsung C&T’s official fashion mall SSF Shop this month. Shinsegae Duty Free and HDC Shilla Duty Free also expanded their platforms to Kakao Gift and SSG.com, and 11st, respectively. Lotte Duty Free continued selling inventory duty-free goods on Lotte On, Lotte Shopping’s integrated mall, and in anticipation of the post-COVID situation, renewed its online duty-free shop and officially reopened its website on the same day.

However, with over 90% of total sales coming from foreigners, voices say that fundamental improvements are necessary for meaningful results. Under the current circumstances, active overseas business expansion is difficult. Lotte Duty Free has postponed the openings of downtown stores in Hanoi and Da Nang, Vietnam, and Sydney, Australia, which were planned to open sequentially from the end of last year through this year, and is monitoring the situation.

An industry official said, "We are expanding sales channels for inventory duty-free goods as if grasping at straws," adding, "We are waiting for the vaccine effects to fully materialize."

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