Retail
S.Korean travel retailers’ downfall without Chinese big spenders
Global sales ranking for Korea’s top two duty-free shop operators – Lotte and Shilla – fell to No. 4 and No. 6, each, in 2023
By 3 HOURS AGO
3
Min read
Most Read
Korea Investment, Sinar Mas to build data center in Indonesia
![close](/images/ico/eyes/close.png)
![open](/images/ico/eyes/open.png)
High-performance 4680 battery war is on; LG Energy takes lead over rivals
![close](/images/ico/eyes/close.png)
![open](/images/ico/eyes/open.png)
HYBE replaces ADOR CEO; Ex-CEO Min barks at sacking
![close](/images/ico/eyes/close.png)
![open](/images/ico/eyes/open.png)
Yanolja's Nasdaq IPO plan hit by Qoo10's liquidity turmoil
![close](/images/ico/eyes/close.png)
![open](/images/ico/eyes/open.png)
S.Korea's LS Materials set to boost earnings ahead of IPO process
![close](/images/ico/eyes/close.png)
![open](/images/ico/eyes/open.png)
![Lotte Duty Free shop entrance in Myeongdong, Seoul (Courtesy of Yonhap)](https://www.kedglobal.com/data/ked/image/2024/09/03/ked202409030012.700x.0.jpg)
Before COVID-19 swept the world, South Korea’s top two travel retailers Lotte Duty Free and Shilla Duty Free Shop ascended to the world’s No. 2 and No. 3 by sales in 2019 but repeating the past glory seems to be at the end of the rainbow.
Betraying their euphoric expectations, Chinese tourists’ return to Korea has failed to rejuvenate the Korean duty-free retail industry, largely due to the absence of lavish Chinese spenders who used to gobble up expensive cosmetics and luxury brands’ items before the pandemic.
According to The Moodie Davitt Report on Monday, Lotte Duty Free dropped to the world’s fourth-largest travel retailer after its sales fell 11.9% year-over-year to 3.84 billion euros ($4.2 billion) in 2023. Shilla Duty Free Shop was kicked out of the world’s top five club and ranked No. 6 with sales of 3.07 billion euros, down 20.4% over the same period.
Switzerland-based travel retail giant Avolta AG returned to the top spot thanks to a 21.6% rise in sales to 9.21 billion euros after elbowing out China Duty Free Group (CDFG) with sales of 8.62 billion euros to the second spot.
French retailer Lagardère Travel Retail and US rival DFS Group ranked third and fifth with sales of 5.2 billion euros and 3.4 billion euros, respectively.
![(Graphics by Dongbeom Yun)](https://www.kedglobal.com/data/ked/image/2024/09/03/ked202409030011.700x.0.jpg)
Korean travel retailers suffered more sales losses in the first half of this year, dimming hope for a recovery.
Lotte Duty Free swung to an operating loss of 46.2 billion won ($34.5 million) in the first six months of this year from a year ago, while Shilla Duty Free Shop’s sales plunged 43% to 1.67 trillion won over the same period.
LOSS OF CHINESE BIG SPENDERS
The main culprit of the Korean duty-free retailers’ poor performance is changes in the spending trend of Chinese tourists, said the industry observers.
Korea received about 7.7 million foreign visitors in the first half of this year, up 73.8% from the same period last year. Of them, 41%, or 3.2 million, were tourists from China, Hong Kong, Macao and Taiwan.
But Chinese tourists did not spend much on luxury items during their visits to Korea unlike those who were not hesitant to open their wallets for expensive goods before the pandemic.
![Foreign currency exchange outlet in Myeongdong (Courtesy of Yonhap)](https://www.kedglobal.com/data/ked/image/2024/09/03/ked202409030015.700x.0.jpg)
According to Jing Daily, a Chinese news outlet mainly reporting the luxury shopping trend, Chinese big spenders opt for Japan over Korea to shop for expensive duty-free items largely due to the sharp fall in the Japanese currency value against the Chinese currency.
Over the past five years, the yen weakened about 40% against the yuan, but the Korean won fell about 15%, making the same luxury items sold in Japan cheaper and more attractive with Chinese money than those in Korea.
BANG FOR THE BUCK
Chinese tourists’ shopping trends in Korea have also changed.
Before the COVID-19 pandemic, Chinese travelers spent heavily on high-end Korean cosmetics products from the country’s household names such as LG H&H Co. and Amorepacific Corp.
Now many Chinese tourists chase after bang for the buck offered by smaller Korean cosmetics brands such as Mediheal, Clio Cosmetics, Dr.G and Rejuran.
The outlook for the Korean duty-free shopping industry looks grim as Beijing has vowed massive state support to nurture the country’s travel retail industry.
![Shilla Duty Free shop (Courtesy of Shilla Duty Free)](https://www.kedglobal.com/data/ked/image/2024/09/03/ked202409030014.700x.0.jpg)
The Chinese government announced late last month that it would add city duty-free shops in other parts of the country such as Guangzhou, Chengdu and Shenzhen.
It has so far licensed city travel retail shops in six cities including Beijing and Shanghai.
During the travel retail boom before the pandemic, the Korean government also issued many duty-free shop licenses to add more players to the market.
Korea’s major travel retailers include Shinsegae Duty Free, Hyundai Department Store Duty Free and Hanwha Galleria Time World Duty Free.
The country also has many city and on-arrival duty-free shops operated by smaller players such as Dongwha Duty Free, City Plus Korea, Doota Duty Free and more.
However, some Korean travel retailers have closed their city outlets to offset mounting losses.
Write to Jae-Kwang Ahn at ahnjk@hankyung.com
Sookyung Seo edited this article.
More to Read
-
Travel & LeisureJeju casinos, hotels bask in return of Chinese tourists; luxury shops fall
Jun 18, 2024 (Gmt+09:00)
2 Min read -
-
RetailChina's CDFG targets duty free operation at Incheon Airport
Feb 27, 2023 (Gmt+09:00)
2 Min read -
-
RetailKorean duty free shops take opposite paths to draw Chinese shoppers
Dec 10, 2021 (Gmt+09:00)
3 Min read
Comment 0
LOG IN