"From Membership Upgrades to Lounge and Beauty Classes" Duty-Free Shops Rush to Secure VIPs

Full-scale Overseas Travel Begins, Competition to Secure VIP Loyal Customers
Membership On-Off Integration Revamped... Aiming for Lock-in Effect

Lotte Duty Free has been conducting a Lanc?me beauty class for top-tier domestic VIP customers at the VIP lounge of the World Tower branch in Songpa-gu, Seoul, since January [Photo by Lotte Duty Free].

As overseas travel has fully resumed for the first time in three years since COVID-19, the domestic duty-free industry is strengthening strategies to secure VIP domestic customers. With Chinese duty-free shops, which have risen to global number one, making efforts to enter the domestic market, local duty-free shops, whose home market is also being threatened, plan to enhance their own competitiveness to secure loyal domestic customers while also focusing on business diversification.

According to the duty-free industry on the 10th, major domestic duty-free shops such as Shilla Duty Free and Shinsegae Duty Free have integrated their online and offline memberships into one this month, raising discount rates by membership tier and expanding partnerships. This is to encourage customers who have used either channel once to utilize their upgraded membership tier for their next purchase.

Shilla Duty Free automatically applies the membership tier corresponding to the purchase amount the day after payment, regardless of online or offline, allowing customers to immediately enjoy benefits. The tier evaluation period was changed from three years to two years, and the criteria for tier selection were lowered for the same reason. Black and Black Prestige tiers are selected separately once a year. Partnerships have also been expanded. Shilla Duty Free members can enjoy discounts and membership upgrades at Expedia, MyRealTrip, SSF Shop, NorangPungSeon, KakaoT Venti, and Yogiyo. Shinsegae Duty Free unified the membership tier selection and maintenance period to one year. The previously separate online and offline tier systems were also integrated by abolishing the online-only tier system. Customers who purchase over $4,000 within a year can receive VIP status. Shinsegae Duty Free has differentiated itself by allowing tier benefits to be enjoyed at major Shinsegae Group affiliates such as Shinsegae Department Store, Shinsegae Premium Outlets, and Insegae International. Lotte Duty Free will also integrate online and offline memberships and upgrade services in the second half of this year.

Duty-free shops are particularly focusing on targeting VIPs who "travel frequently and spend a lot." Concerns about an economic downturn and high exchange rates this year have also strengthened this strategy. The proportion of top VIP customers among domestic sales at Lotte Duty Free's downtown stores surged from about 10% in 2018 to 20% in 2022. To lock in these big-spending customers, VIP events are being expanded. In January, Lotte Duty Free held a Lanc?me beauty class for 40 top customers at the VIP lounge of its World Tower store in Songpa-gu, Seoul, receiving positive feedback. Lotte Duty Free stated, "Last year, we only held one VIP invitation event, but from this year, we plan to hold them regularly at least once per quarter." Since July 2021, Shilla Duty Free has been conducting non-face-to-face beauty classes with La Prairie, Gucci Beauty, Burberry Beauty, etc., for VIP customers, making it a major event for the duty-free shop. This year, they plan to expand immersive beauty classes using the metaverse and hybrid online-offline classes. Hyundai Department Store Duty Free provides the highest Black tier customers with a constant 20% additional discount and vouchers for hotel stays and dining discounts.

According to the Korea Duty Free Association, domestic sales to Korean customers at domestic duty-free shops reached 201 billion KRW in January, more than double the 84.8 billion KRW in the same period last year. According to Korea Tourism Organization's tourism statistics, the number of outbound travelers in the same month was 1,782,313, a 12-fold increase from 147,434 in the same period last year. However, compared to January 2019 before COVID-19, it is still at 61.2%.

The duty-free industry is placing sales diversification as a key task amid the situation where China Duty Free Group (CDFG), a Chinese state-owned duty-free operator that has risen to global number one backed by full support from the Chinese government, is aiming to enter the domestic market. The long-term strategy is to reduce dependence on Chinese tourists and secure stable revenue sources by securing loyal domestic VIP customers and enhancing their presence on the global stage in line with the expansion of international travel. Lotte Duty Free has set an annual sales target of 300 billion KRW for its Melbourne Airport store in Australia, scheduled to open in June. The Singapore Changi Airport store, temporarily operating in the first half of this year, will officially open, and a new store will open in downtown Hanoi, Vietnam, in the second half of the year. Shilla Duty Free also plans to strengthen its duty-free operations at Asian hub airports such as Singapore Changi International Airport and Hong Kong Chek Lap Kok International Airport. A duty-free industry official said, "As overseas travel expands, we will focus on securing customers with purchasing power and strive for sales diversification this year."

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