As diplomatic tensions between China and Japan persist, a mood of refraining from travel to Japan is spreading in China. Chinese tourists who used to visit Japan for cross-border shopping are shifting to Korea, and sales trends at Korean and Japanese department stores are diverging.
Recently, major Japanese department stores saw foreign customer sales fall by nearly 20%, while Korean department stores posted a sharp increase in foreign sales, emerging as a key pillar of results. Domestic department stores are ramping up promotions and content for foreign visitors to drive sales growth.
According to Bloomberg and other foreign media on the 2nd, duty-free sales at Takashimaya in Japan in January fell 19% from a year earlier. J. Front Retailing, which operates Daimaru and Matsuzakaya, posted about a 17% drop in duty-free sales, and H2O Retailing, which operates Hankyu and Hanshin Department Stores, saw sales to Chinese customers plunge 60%. Mitsukoshi Isetan Holdings also saw duty-free sales fall 15% in Dec. last year.
Duty-free sales at Japanese department stores refer to the amount purchased by foreign tourists visiting Japan who present their passports and receive an exemption from the 10% consumption tax. Because it applies only to short-term foreign visitors who are not residents of Japan, it is used as an indicator to gauge foreign tourist spending.
The sharp drop in duty-free sales at major Japanese department stores is seen as the result of a steep decline in Chinese travelers due to the Chinese government's advisory to refrain from visiting Japan. According to the Japan National Tourism Organization (JNTO), 385,300 Chinese visited Japan in Jan., down 60.7% from a year earlier.
By contrast, in Korea's department store sector, foreigners, including Chinese visitors, are becoming a new "cash cow." Last year, foreign sales at Lotte Department Store reached 734.8 billion won, up 28.5% from a year earlier. In the fourth quarter, foreign sales at the Myeong-dong main store rose 43% year over year, accounting for about 19% of total sales. Shinsegae Department Store and Hyundai Department Store each recorded foreign sales of about 650 billion won and 700 billion won last year.
This year, the contribution from foreign sales is growing even more. Shinsegae Department Store's foreign sales in Jan. topped 90 billion won, marking a record high for a single month. During the Lunar New Year holiday from the 15th to the 23rd last month, sales from Chinese-speaking customers from China and Taiwan at Lotte Department Store jumped 260% from a year earlier. During the same period, Hyundai Department Store's sales to Chinese customers at The Hyundai Seoul rose 210%.
Department stores are strengthening various promotions and content for foreign shoppers. Lotte Department Store late last year launched the "Lotte Tourist Membership Card," which combines shopping benefits at Lotte affiliates with a transit card function for foreign tourists. The membership has gone viral mainly on China's Xiaohongshu and recently surpassed a cumulative 38,000 issuances.
At Lotte Department Store's main store, Kinetic Ground, a K-fashion specialty hall that opened last year, foreigners now account for 70% of buyers. Lotte Department Store is strategically bringing in brands without flagship stores in the Myeong-dong district and showcasing them there.
Shinsegae Department Store extended this year the three-party MOU (memorandum of understanding) it signed last year with the Korea Tourism Organization (KTO) and Shinsegae Duty Free to attract foreign tourists. In collaboration with the tourism organization, it plans to jointly develop K-culture experience programs linked to the main store's The Heritage, the academy and more.
Shinsegae Department Store also plans to more than double this year's participation in various travel fairs abroad—such as road shows and travel marts—that can promote Korea compared with last year. It will also offer monthly discounts and coupons focused on fashion, beauty and food, which are highly preferred by inbound tourists.
Hyundai Department Store recently partnered with China's largest card company, UnionPay, to introduce the mobile easy payment service "Apple Pay" at department stores and outlet branches nationwide. With this, Chinese customers visiting Hyundai Department Store can now pay with Apple Pay without a physical card.
In the first half, Hyundai Department Store will also set up a dedicated pop-up space on the sixth floor of The Hyundai Seoul to showcase K-beauty and K-fashion. It plans to run various experience programs for individual Chinese tourists, including personal color analysis and T-shirt customization.
A department store industry official said, "Given the recent pace of foreign customer inflows, major companies could surpass 1 trillion won in foreign sales this year," adding, "Foreigners have high spending per customer, and luxury-centered consumption is active, so there is also a positive effect on profitability."