The number of foreign tourists visiting Korea increased last year, but the duty-free industry's performance remained sluggish. To capture the growing tourist traffic, the industry is in the midst of refurbishing stores with an emphasis on hands-on experiences.
According to the Korea Tourism Organization (KTO) on the 20th, the number of foreign tourists who visited Korea from January to November last year was about 17.42 million, up 15.4% from a year earlier. In contrast, according to the Korea Duty Free Shops Association, domestic duty-free shop sales during the same period were 11.4145 trillion won, down 12% from a year earlier.
Leading corporations also posted weak results. Lotte Duty Free recorded sales of 724.1 billion won and operating profit of 18.3 billion won in the third quarter last year. Sales fell 9.4% from a year earlier. However, it swung to the black from an operating loss of 46 billion won in the third quarter of 2024. The Shilla Duty Free posted sales of 849.6 billion won and an operating loss of 10.4 billion won in the third quarter last year. Sales rose 0.6%, but it remained in the red for a third straight quarter. Hyundai Duty Free reported third-quarter sales of 222.5 billion won, down 2.5% from a year earlier. Operating profit was 1.3 billion won. Shinsegae Duty Free posted an operating loss of 5.6 billion won, down 10.6 billion won from a year earlier. Sales were 538.8 billion won, up 14.2%.
The duty-free industry is reducing the number of stores while beefing up experiential content and competing with differentiated brands. The Shilla Duty Free and Shinsegae Duty Free decided to return their business rights after a rent dispute with Incheon International Airport Corporation, leading to their withdrawal from Incheon Airport. The duty-free sector has shifted to a profitability-focused strategy, including shrinking airport store footprints.
Lotte Duty Free recently fully revamped the first-floor Star Avenue at its Myeong-dong main store in Seoul into a K-pop and experience-centered cultural complex. It was reconfigured as an immersive exhibition space under the "STARIUM" concept, significantly enhancing experiential elements.
The Shilla Duty Free is ramping up K-culture marketing. Last year it selected the boy group "ATEEZ" as its promotional model. It is targeting foreign tourists with marketing such as an offline lucky draw event for foreign customers and a "2026 goal achievement challenge" linked with ATEEZ that offers prizes.
Shinsegae Duty Free created a hands-on space called "Taste of Shinsegae" at its Myeong-dong store in Seoul that combines K-food, desserts and K-pop. It introduced changes such as a dedicated BTS store and bringing together popular domestic dessert brands.
Hyundai Duty Free carried out intensive restructuring last year and plans to focus this year on strengthening online and offline MD competitiveness. It will expand experiential programs such as beauty diagnostics using AI and K-culture experience content.
A duty-free industry official said, "On top of the recent increase in tourists, projections say Chinese tourists will grow further, so we need to build competitiveness in advance to draw them in." The official added, "We will maintain core competitiveness by attracting a wide range of brands, and we will expand experiential elements by showcasing diverse K-content beyond the previous focus on luxury goods."