Korea’s duty-free companies see sales surge in Q1 as travel resumes

Hyundai Department Store Duty Free’s Incheon International Airport store [Photo provided by Hyundai Department Store]

Korea’s duty-free companies saw sales increase as much as ninefold in the first quarter as travel resumed after countries lifted Covid restrictions and opened borders to visitors.

According to sources in the duty-free industry on Thursday, Lotte Duty Free saw sales from domestic customers jump 400 percent from a year ago in the first three months of this year, Shinsegae Duty Free grew 680 percent and Hyundai Department Store Duty Free Co. jumped 854 percent.

In particular, Lotte posted a 290 percent increase in sales of the top 20 fashion brands in the first quarter, including Louis Vuitton, Chanel, Hermes, Gucci and Prada. Shinsegae’s Incheon International Airport outlet also saw sales of luxury fashion brands increase every month over the same period. Luxury goods sales grew 21 percent in March from a year ago, overwhelming other categories.

“As the duty-free purchase limit for Koreans increased to $800 per person from $600, the range of products available has expanded,” said a Shinsegae official. “In addition, foreign visitors‘ preference for top luxury brands, such as Hermes, Chanel and Bulgari, has increased since China’s reopening.”

Handbags were the top-seller in the fashion category, which accounts for 22 percent of total sales at Lotte Duty Free. The proportion of handbags in the luxury goods sales increased to 35 percent from 25 percent before the pandemic. Jewelry and watch sales also showed noticeable growth, increasing sixfold from the same period last year.

Sales of general watch items dropped, while sales of jewelry, such as expensive rings and necklaces increased. General watch items, which accounted for 54 percent of sales in the jewelry and watch category in 2019, fell to 28 percent this year, while sales of rings, necklaces, bracelets and earrings expanded to 57 percent from 9 percent.

“As smartwatches have become common, the number of people looking for expensive watches has decreased significantly,” said a Lotte official.

Cosmetics and perfume accounted for the highest proportion of total duty-free sales. They accounted for 80 percent of sales at Hyundai Department Store Duty Free. Shinsegae Duty Free also had the highest percentage of sales in the same category.

Online demand for duty-free products decreased. Hyundai Department Store Duty Free’s Incheon International Airport store saw sales rise 629 percent year-on-year in the first quarter, but its online mall sales fell 70 percent.

The industry expects sales to return to pre-pandemic levels when the number of Chinese tourists visiting the country increases in the second half this year.

“The number of domestic customers has increased to 60 percent of 2019 levels,” an official from Shinsegae said. “Sales from Southeast Asian consumers, including Vietnamese and Thais, are growing rapidly, filling the void left by the drop in Chinese visitors. Sales from Southeast Asian group tourists increased by 20 percent in the first week of April from a week ago.”

The local currency’s value is also a variable. The won, which is hovering around 1,300 won per dollar, is burdensome for local duty-free companies as they must have price competitiveness against department stores or online malls.