Lee Hyo-sik is Finance Desk editor at The Korea Times. He manages finance-related stories on macroeconomics, banks, stocks, bonds, crypto etc. He is passionate about covering what's happening in Korea's financial industry and explaining it to both Korean and non-Korean readers. You can reach him at leehs@koreatimes.co.kr. Your insights and feedbacks are always appreciated.
Duty free shops earn more from non-Koreans
By Lee Hyo-sik
Lotte, Shilla and other duty free shop operators here will earn more from Chinese and non-Korean tourists this year than from local shoppers, the latest industry data showed Thursday.
Non-Koreans are expected to outspend Koreans at local duty free stores as the surging numbers of Chinese visitors spend hundreds of millions of dollars to purchase made-in-Korea cosmetics and other items.
The country’s duty free shop market is projected to reach 7.2 trillion won ($6.5 billion) in 2014, up from 6.8 trillion won, according to Lotte and other duty free firms.
Of the 7.2 trillion won in sales, the retailers will likely generate 3.8 trillion won from non-Korean tourists if the current trend continues. Korean shoppers are expected to buy goods duty free making up the remaining 3.4 trillion won. If so, this would the first time for non-Korean shoppers to outspend Koreans at duty free stores.
In 2013, the companies generated 3.5 trillion won from Koreans, and 3.3 trillion won from non-Koreans.
“Local duty free shops have been benefiting significantly from the soaring number of Chinese visitors who spend big money on various goods,” said a spokesman for Lotte Duty Free, Korea’s largest duty free shop operator. “The sales from non-Korean customers will continue to increase at an explosive pace in the coming years as more Chinese will visit Korea.”
According to the Korea Tourism Organization, nearly 6 million Chinese tourists are expected to visit the nation in 2014. The figure is forecast to jump to 7.8 million in 2015 and to 17.6 million in 2020.
In 2013, Lotte earned 3.55 trillion won and 60 percent of its sales came from Chinese and other foreign shoppers. This year, non-Korean customers account for 65 percent of the company sales and the ratio will continue to go up for the foreseeable future, according to the spokesman.
Shilla Hotel, which generates over 90 percent of its revenue from duty free business, saw its duty free shops earn 1.87 trillion won from January through September, up 20 percent from the same period last year. Of the 1.87 trillion, the company earned 1.31 trillion won, or 70 percent, from Chinese and non-Korean customers.
There are 41 duty free shops in the country. Of the 41, 18 are run by Lotte and other large business groups, 14 by small-and medium-sized companies and nine by state-run firms.