Duty Free Shops Pricier Than Department Stores
By Kim Hyun-cheol
Staff Reporter
An MCM shoulder bag was tagged at $360, or 480,492 won, at the Lotte Duty Free Shop in downtown Seoul, Friday. The store, however, had to add an additional 15 percent discount for purchases in won, bringing the price down to 408,418 won.
The reason is to keep it cheaper than it is in the Lotte Department Store, where the same item was being sold at 417,000 won on the same day. Without the discount, prices most items would have exceeded those in the department store.
For a long time, going to duty free shops was the best way for trend-savvy customers to buy luxury brand fashion and cosmetic goods at cheaper prices. The recent weak Korean currency, however, is drastically narrowing the gap between duty free shops and department stores and online shops.
With no added taxes, items at duty free shops are normally 15 to 20 percent cheaper than department stores, but the ongoing fluctuation of the won-dollar exchange rate is making stores add further discounts to avoid the ``price reverse'' effect.
``Customers are walking away as we are losing our price advantage because of the weak won,'' a spokesman of Shilla Duty Free Shop said. ``We are dealing with the crunch through additional discounts and more freebies.''
Some online malls now sell the same goods at prices lower than duty free shops. Hmall, an online unit of Hyundai Home Shopping, September sold 50 percent more import cosmetics than a year earlier.
``Local dealers of imported cosmetics can't easily hike prices in spite of the high won-dollar rate. Cosmetics are sensitive to price changes, so they fear overall sales might shrink,'' Kwak Jin, a merchandiser of Hmall, said.
Not all duty free shops are suffering setbacks. In-flight duty free shops benefit from a policy, which applies a fixed rate on a monthly basis.
Airline carriers choose the rate late each month to be applied for the next month. This month, one dollar is equal to 1,110 won in on-flight shops of Korean Air and Asiana Airline, making items nearly 200 won per dollar cheaper compared to duty free shops on the ground.
On a Korean air flight, passengers can buy a $100 Lancome anti-wrinkle cosmetic product for 111,000 won, over 10,000 won cheaper than in a Lotte Duty Free Shop. Currently items are sold at 8 to 12 percent lower than normal tax-free outlets.