Louis Vuitton mulls shuttering downtown duty-free shops in S. Korea

French luxury brand Louis Vuitton is considering further reducing its presence in downtown travel retail industry in South Korea to focus on airport and department stores to enhance its premium image, stoking concern over further deterioration of Korean duty-free retailers’ business.

According to UK-based travel retail industry magazine the Moodie Davitt Report last week, Louis Vuitton plans to close its three downtown outlets in Korea – the Shilla Duty Free’s Jeju store, Lotte Duty Free’s Busan operation, and Jamsil World Tower shop in March. The magazine added that the French luxury goods maker is also reviewing a plan to close the remaining three other downtown travel retail operations in Seoul from October to March next year.

While exiting from the downtown travel retail market in Korea, Louis Vuitton is expected to expand airport shops. It is said to be planning to add a second shop in Incheon International Airport Terminal 2 next year while keeping its existing shop in Terminal 1. It is also reported to open six more airport shops in China by 2023 and second outlet in Hong Kong International Airport for Chinese consumers, according to foreign media.

Louis Vuitton is said to have made the latest decision amid growing concerns over its brand image undermined by cross-border shuttle traders called Daigous, individual merchants who buy large volume of luxury goods at duty-free shops at high discount rates and resell them on the Chinese mainland. Since Chinese tourists to Korea have plunged after Beijing’s ban on group tours to Korea due to Seoul’s host of U.S. missile defense system and the Covid-19 outbreak, Korea’s travel retailers have been highly dependent on those shuttle traders with 90% of their sales coming from them.

While reducing its presence in downtown duty-free business, the French luxury brand is also said to refocus around its operations at department stores in Korea to enhance its premium image and profitability.

Koreans’ spending on luxury goods has surged despite the years-long pandemic-driven travel restrictions. Louis Vuitton’s sales in Korea recorded 1.05 trillion won ($884 million) in 2020, 33 percent up from a year ago. As the demand for luxury goods has exploded, Louis Vuitton had raised its prices in five times last year alone and is expected to up the prices again this year.

Korean duty-free retailers are concerned that other luxury brands may follow suit of Louis Vuitton, which would further deteriorate their profitability.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]