In May, duty-free shops that expected the 'golden holiday special' received disappointing results. The golden holiday, including Children's Day (May 1-6), along with China's Labor Day (April 30-May 2) and Japan's Golden Week (April 29-May 5), raised expectations for increased sales; however, it fell short of compensating for the revenue gap caused by the suspension of transactions with daigong (Chinese shopping agents).
According to the Korea Duty Free Shops Association, the total revenue of duty-free shops nationwide in May (excluding in-flight duty-free) was 1.0525 trillion won, a 16% decrease compared to the same period last year. The number of customers was 2.57 million, which was a 6% increase compared to last year, but it did not lead to an increase in sales.
The impact of reduced foreign sales was significant. Foreign sales amounted to 774.1 billion won, which was approximately a 21% decrease compared to last year. The number of foreign visitors to duty-free shops was 956,796, reflecting a 17% increase; however, this did not translate into increased sales.
In particular, the revenue of downtown duty-free shops that halted transactions with daigong was sluggish. In May, the number of foreign customers at downtown duty-free shops increased approximately 20% to 406,607. However, sales dropped to 651.7 billion won, around a 27% decrease compared to the same period last year. Compared to the previous month of April, while the number of foreign customers remained similar, sales fell by 19%.
On the other hand, sales at departure duty-free shops increased in line with the rise in the number of foreign customers. The number of foreign customers at departure duty-free shops in May was 535,202, up 15% from last year. Foreign sales totaled 121.1 billion won, a 25% increase compared to the previous year.
The British duty-free industry publication Moodie Davitt Report analyzed, "There is an increasing trend of Chinese tourists purchasing from local stores (such as Olive Young and Daiso) rather than Korean duty-free shops," noting, "This confirms the continuing decline in daigong transactions."
The background of the decline in downtown duty-free shop revenue also included a strategic shift from growth focused on volume to growth focused on profit. In the case of Lotte Duty Free, the reduction in the proportion of daigong sales—which incur high commissions—resulted in a return to profitability in the first quarter for the first time in seven quarters.
Industry insiders cautiously assess that the duty-free market has hit rock bottom. There are expectations that performance will improve due to factors such as reduced competition from the withdrawal of major downtown duty-free shops and a decrease in discounts for daigong. Additionally, the no-visa entry policy for Chinese group tourists scheduled for the second half of the year is expected to have a positive impact.
A duty-free shop official said, "Recently, the number of inbound tourists has increased, and since the no-visa entry policy for Chinese group tourists is scheduled to be implemented in the second half of the year, there is a possibility for performance improvement."