'100,000 Mileage, Pay Worth 1 Million Won'... Duty-Free Shop Loyalty Customer Acquisition Competition

Duty-Free Industry Introduces Mileage and Membership Programs
Aiming for Domestic Customer Lock-in Effect Instead of Chinese Tourists

Duty-free shops, which had been busy catering to Chinese group tourists (Youke), have started targeting domestic customers. This is because the Chinese, hit hard by the economic downturn, have reduced their overseas travel, preventing duty-free shops from fully benefiting from the Youke effect. With foreign tourists' travel trends rapidly shifting towards individual tourism, the strategy is to secure domestic customers first.

According to the duty-free industry on the 3rd, Lotte Duty Free launched and has been operating the ‘LDF Mileage System’ since January 1, the first day of the new year. It targets domestic members and offers gifts based on mileage amounts. One mileage point is accumulated for every 1 dollar spent. Upon reaching certain mileage thresholds, customers can receive gifts. For example, if a customer accumulates 100,000 mileage points, they can choose one gift from LG StanbyME GO, LDF Pay worth 1 million KRW, a Lotte Hotel accommodation voucher, or a travel voucher. Customers who collect 200,000 mileage points are also granted ‘HONOR CLUB’ status, which provides lifetime access to the Star Lounge.

On the 11th, a duty-free shop in Seoul appeared quiet due to the sparse visits of Chinese tourists. Photo by Jo Yongjun jun21@

Offering mileage points based on spending to receive gifts and benefits is a first in the duty-free industry. Due to the nature of duty-free shops, where regular consumption is difficult, it has been more common to provide prepaid cards or give rewards based on purchase amounts rather than a mileage system that encourages steady spending at one place. Lotte Duty Free also continuously held events last year where customers could get money back in LDF PAY when purchasing specific products with certain cards within specific price ranges. Introducing the mileage system now signifies an intention to secure loyal customers who will consistently use Lotte Duty Free, rather than one-time shoppers.

Shilla Duty Free also introduced a paid membership called ‘Shilla & Basic’ last month, freely available to domestic customers. By paying a membership fee of 300,000 KRW, members receive points and gifts worth over 360,000 KRW, and enjoy Gold Plus membership status for six months, which offers significant discounts both online and offline. After first launching a specialized paid membership limited to 200 people in July 2022, followed by memberships for 500 people in November, 100 people in February 2023, and a 20s-only membership in June, all of which sold out quickly, Shilla Duty Free introduced a membership with continuous enrollment. The strategy is to attract customers with benefits exceeding the membership fee and convert them into loyal customers. Hyundai Department Store Duty Free is also running events where domestic customers receive money back when paying a certain amount with specific cards and payment methods.

The competition to attract domestic customers is part of duty-free shops’ efforts to secure more sales channels by any means. An industry insider explained, “The recovery of Chinese tourists is sluggish, and many foreign tourists visit Korea as individual travelers rather than in packages. We cannot keep relying solely on China and group tourists, so we are strengthening competitiveness by diversifying customers, including securing domestic customers.”

Meanwhile, Shinsegae Duty Free is focusing on attracting foreign individual tourists rather than domestic customers, adopting a different strategy from the other three companies. It signed a business agreement with Hong Kong airline Cathay Pacific and plans to provide partnership services to 10 million members who use Cathay Pacific flights starting next month. Asia Miles, the currency used within the Cathay Pacific Group, will be earned at a rate of 1 Asia Mile per 1,000 KRW spent at Shinsegae Duty Free. This is a proactive response to the new travel paradigm centered on individual tourists. Regarding this, Yushin-yeol, CEO of Shinsegae Duty Free, said, “Rather than waiting for China to normalize, we saw the need to secure diverse content and enhance partnerships in other areas. We are also considering expanding customer touchpoints with other international airlines, including Cathay Pacific.”

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