The domestic duty-free industry is grappling with the foreign customer spending per person (purchase amount) that has fallen below 1 million won. Although the number of foreigners visiting duty-free shops has increased compared to last year, their consumption has shifted towards cheaper K-beauty and K-food products rather than luxury goods, leading to reduced spending. A reduction in transactions with daigongs (Chinese merchants) who significantly contributed to duty-free shop sales has also resulted in a decrease in customer spending.
In this situation, domestic duty-free operators are hoping for visa-free entry approvals for Chinese group tourists, referred to as "big spenders." The visa-free entry for Chinese group tourists was announced to be implemented in the third quarter of this year by the previous government. However, specific guidelines have not been provided since the change in administration.
According to the Korea Duty Free Shops Association, approximately 5.13 million foreigners visited domestic duty-free shops during the first half of this year. This marks a 16.1% increase compared to the same period last year (4.42 million). However, during the same period, the revenue from foreigners at domestic duty-free shops was 4.8415 trillion won, a decrease of 14% compared to the previous year (7.3969 trillion won).
Even with an increase in visitors, the spending amount has decreased, and the foreign customer spending during the first half was about 940,000 won. This represents a decrease of about 43% compared to the same period last year (1.67 million won). In May and June, the spending per customer dropped to 810,000 won and 850,000 won, respectively.
The Korea Duty Free Shops Association held the "Korea Duty Free Festa 2025" event from April to last month, conducting various promotional activities with discount benefits. Thanks to these efforts, the number of foreign visitors to duty-free shops in the second quarter of this year reached approximately 2.89 million, up 28.7% compared to the first quarter (approximately 2.24 million).
Nevertheless, the decrease in customer spending is attributed to a change in the consumption trends of foreign tourists. Recently, as K-beauty and K-food have become trendy, tourists are increasingly purchasing items such as cosmetics, seaweed, or desserts, rather than luxury goods as they used to.
A representative from the duty-free industry noted that "ultimately, the products that yield the highest sales and profit for duty-free shops are high-priced luxury goods" and mentioned, "Even though we are increasing the proportion of food and cosmetics in duty-free shops according to trends, it does not significantly help our revenue."
The reduction in transactions with daigongs is also a reason for the decline in customer spending. Daigongs refer to individuals or groups that buy goods overseas, including in Korea, and then resell them in mainland China for profit.
In the past, domestic duty-free operators actively sought to attract daigongs, even paying a type of rebate known as a commission for bringing customers. However, after the THAAD (Terminal High Altitude Area Defense) incident in 2017 and the COVID-19 pandemic in 2020, competition among operators led to commissions soaring by as much as 50%, causing significant deterioration in profitability. Major duty-free operators have gradually reduced transactions with daigongs since the end of last year.
The domestic duty-free industry is pinning hopes on the expansion of Chinese group tourists. Chinese tourists often visit Korea for shopping, and their significant consumption of luxury goods greatly benefits sales and profitability.
The Chinese government allowed short-term visa-free entry for Korean nationals last November. In response, our government announced in March that it would temporarily implement visa-free entry for Chinese group tourists from the third quarter of this year until the end of the year. Although detailed guidelines have not yet been released since the change in administration last month, the duty-free industry believes there is a high likelihood that the policy will be implemented, considering its effect on domestic demand.
Cho Sang-hoon, a researcher at Shinhan Investment Corp., stated that "domestic duty-free operators are experiencing continued deterioration in performance due to weak demand in downtown stores and the burden of rental fees at airport locations" and emphasized that "long-term revenue growth will depend on the recovery of high-spending Chinese tourists."