Online duty-free sales to lift Shinsegae
A worker cleans the doorstep of Shinsegae Department Store in Seoul, Nov. 12. / Korea times file
By Kim Jae-heun
A growing number of Chinese online duty-free shoppers and still-strong general overseas tourist duty-free shopping are set to solidify Shinsegae's bottom line, sources familiar with the issue said Sunday.
The top-tier department store operator has been hit hard by the spread of COVID-19 on multiple fronts. Specifically, its duty-free business reported a 37 billion won operating loss during the second quarter, which heavily affected Shinsegae's overall profit.
But the good news is that duty-free shopping is coming back strong with overseas consumers once again outstripping domestic shoppers for online sales only. Duty-free shops in Korea fared well in September this year as total sales reached 1.5 trillion won, up from 1.44 trillion won, year-on-year, according to data from the Korea Duty Free Association. In total, overseas visitors' spending accounted for 1.44 trillion won in September compared to 43 billion won by domestic shoppers.
Shinsegae officials expect fourth quarter earnings will be good given the increased shopping by international travelers via online channels. The Korea Customs Service recently extended the deadline for duty-free local sales until the end of the year as a means to boost activity.
“Shinsegae is seeking to further improve its duty-free sales during the fourth quarter by selling products in the local market, and in December will target online Chinese customers with its beauty products,” an official said.
As cosmetics consumption has gradually improved in China and sales at duty-free shops are on the recovery track, Shinsegae International's main business of cosmetics is expected to expand for the remainder of the year.
With COVID-19 becoming more under control in Asia, and the government reportedly having discussions to ensure Chinese President Xi Jinping's scheduled visit to Korea goes ahead before the end of the year, Shinsegae expects Chinese tourist numbers to make a comeback and lift their sales.
“In the fourth quarter, sales at department stores will increase in earnest if a new rental fee system is adopted in favor of duty-free shops at the Incheon International Airport. Shinsegae International's sales coming from the cosmetics and imported fashion sectors is growing,” the official added.
China and South Korea earlier agreed to ease quarantine requirements for some business travelers as a way to revive essential economic activities primarily disrupted by the pandemic. It remains to be seen whether or not Beijing will further press South Korea for similar corresponding measures that it applies to other countries to incoming Chinese tourists.
President Moon Jae-in was earlier criticized for not imposing strong curbs on Chinese visitors to Korea, but coordinated efforts to control the outbreak by Seoul and Beijing have reduced the political risk of easing such measures. South Korea is testing incoming Chinese travelers for the virus. However, Chinese travelers visiting Korea are responsible for covering the costs during their 14-day self-quarantine period.