Korea's duty-free industry will raise to 1,500 won the exchange rate used as the basis for setting duty-free sales prices to respond to the rise in the won-dollar rate. The aim is to keep price competitiveness by lowering the dollar-based selling prices of domestic brand products.
According to the duty-free industry on the 7th, Lotte, The Shilla Duty Free, Shinsegae Duty Free and Hyundai Duty Free will raise the reference exchange rate applied to domestic brand products from 1,450 won to 1,500 won. Lotte Duty Free and The Shilla Duty Free will apply the new rate starting on the 8th, and Shinsegae Duty Free and Hyundai Duty Free will do so starting on the 9th.
The reference exchange rate is the rate that duty-free shops apply on their own when calculating the dollar selling price of domestic brand products supplied in won. Because the dollar price is set by dividing the won selling price by the reference rate, the higher the reference rate, the lower the dollar-denominated price.
For example, under the previous system, applying a 1,450-won reference rate to a 43,500-won item yields a selling price of $30, but raising the reference rate to 1,500 won makes it $29. This adjustment is expected to lower duty-free selling prices of domestic brand products by about 3%.
With the high exchange rate persisting, the duty-free industry has been continuously adjusting the reference rate to maintain the price competitiveness of domestic brand products. After raising the rate from 1,350 won to 1,400 won in Nov. last year, it was increased to 1,450 won in Mar. this year. With this step, the reference rate has been raised three times over about eight months since Nov. last year.
However, this adjustment applies only to domestic brand products. Overseas luxury brands are excluded from the reference rate change because their selling prices are set according to their headquarters' global pricing policies.