Duty-free shops court Chinese tourists with trendy brands

Chinese tourists to Korea are now more interested in trendy shops and unique experiences than they are in traditional duty-free shopping.

Shinsaegae Duty Free's new brand character Bani, in collaboration with fashion brand Off-White, is displayed at a pop-up store in Jung District, central Seoul. [NEWS1]

Gone are the days of Chinese tourists sweeping products off shelves. They are now more inclined to visit trendy, social media-worthy shops and pop-up stores, putting higher value on unique experiences. Stores are shifting strategies in order to adapt.

Shinsaegae Duty Free, for example, revealed its self-produced characters Paul and Bani on Oct. 2. A pop-up store at the Shinsegae Duty Free shop in Jung District, central Seoul will showcase Bani, in a photo zone until the end of the month. The store, which is run in collaboration with fashion brand Off-White, sells limited edition goods.

KakaoTalk emoticons featuring Paul and Bani will also be released in November.

The move is seen as a strategy to lure foreign tourists, including Chinese group tourists, through exclusive products and engagement marketing. While Chinese group tours have resumed in Korea, duty-free shops are no longer considered an essential part of the Korean shopping experience. Chinese MZ generation group tourists are increasingly showing preferences for hot spots in Seongsu-dong and Hongdae, popularized by social media, over duty-free shops in Myeong-dong.

Brands that have experience running pop-up stores in hot spots that younger people and foreigners visit frequently have an advantage. “We are focusing on looking for brands that offer enjoyable cultures and experiences,” said a Shilla Duty Free insider.

Lotte Duty Free Jeju Airport Store [LOTTE DUTY FREE]

A total of 638,030 foreign customers shopped at domestic duty-free shops in September, an increase of 287.4 percent from last year, but sales dropped 34.6 percent according to the Korean Duty-Free Shop Association. Shilla Duty Free recorded 16.3 billion won ($12.35 million) in operating deficits for this year’s third quarter.

“Expectations were high after Chinese group tours to Korea were permitted in August, but the mood is as of yet stagnant,” said an insider in the industry, adding that “because there are a lot of individual tourists in the 20s to 30s age range, average purchase amounts per person are low.”

The industry is expecting a turnaround as charter flights from China for group tours resume. China-based West Airlines has been operating charter flights between Jeju Island and Zhengzhou, Henan Province, since last Friday. It is the first time in six years and 10 months, since China’s ban after the Terminal High Altitude Area Defense (THAAD) system was implemented, that charter flights for group tours from China have restarted. Charter flights between Korea and various Chinese cities, including Hefei and Fuzhou, will also begin operating this month.

Lotte Duty Free’s Jeju store has placed brands that are popular with China's MZ generation, including “Zanmang Loopy,” “Chasin’ Rabbits” and “Who.A.U,” at the forefront to attract customers from charter flights.

Brands are also offering discount promotions in partnership with local restaurants and tourist spots. The hope is that by receiving duty-free shop coupons at restaurants, tourists might be pushed to visit those stores.

“The resumption of charter flights is seen as a full-fledged comeback in that youkes with great purchasing power such as the middle-aged [customers] will return,” said an insider from the industry. Youke is the Chinese term for group tourists.

BY CHOI SUN-EUL, KIM JU-YEON [kim.juyeon2@joongang.co.kr]