Duty free stores struggle with falling sales amid foreign tourists' shifting shopping trends

Foreign customers examine cosmetics items at a CJ Olive Young store in Seoul's Myeong-dong in this undated photo. Courtesy of CJ Olive Young

Duty free stores in Korea are struggling with declining sales due to shifting shopping behaviors among foreign tourists, who are increasingly turning to trend-setting retail chains offering affordable prices, data showed Monday.

The sales downturn is particularly striking given the full recovery in inbound tourism and record-breaking numbers of international visitors, suggesting that traditional duty free goods — including luxury items — are fast losing their appeal.

According to the Korea Duty Free Shops Association, duty free stores nationwide posted combined sales of 6.36 trillion won ($4.56 billion) in the first half of 2025, down from 7.39 trillion won in 2024 and 11.65 trillion won in 2023.

Monthly sales also showed sluggish performance. After starting at 954.3 billion won in January, sales climbed to 1.18 trillion won in April but slipped back to 1.08 trillion won in June and declined further to 920 billion won in July. July sales fell 8.6 percent from a year earlier.

To cope with declining sales, two leading duty-free operators — Shilla Duty Free and Shinsegae Duty Free — requested a 40 percent rent reduction for their cosmetics, perfume, liquor and tobacco stores at Incheon International Airport.

The request was filed through court mediation, but no agreement was reached between the companies and Incheon International Airport Corp., as the airport authority maintained that a rent cut would be difficult.

Duty free stores' poor performance contrasts sharply with surging international tourist arrivals.

According to the Korea Tourism Organization, Korea welcomed a record 8.83 million foreign visitors in the first half of 2025 — a 14.6 percent increase from the same period last year, and 4.6 percent higher than the previous high of 8.44 million set in the first half of 2019 before the COVID-19 pandemic.

In June alone, the number of inbound tourists rose 14.2 percent year-on-year to 1.62 million.

The decline in duty free sales, despite an increase in the number of international tourists, is largely attributed to a shift in spending patterns, according to Choi Chul, a professor of consumer economics at Sookmyung Women's University.

“Unlike in the past, these tourists are less inclined to purchase high-end luxury goods and are instead opting for more affordable items related to K-pop culture, such as cosmetics, clothing and snacks,” the professor said.

Inha University economics professor Shin Il-soon voiced a similar view. “International visitors want to experience Korean culture firsthand by using the same items they’ve seen in Korean dramas, films and other media,” he said.

Leading this shift are retail chains such as CJ Olive Young, Musinsa and Daiso, which dominate the beauty care, fashion and miscellaneous goods markets, respectively.

CJ Group’s beauty retail arm saw foreign customers account for more than 25 percent of offline sales for the first time in the first half of 2025, at 26.4 percent.

This contributed to a 17.9 percent year-on-year sales increase, bringing total sales to 2.69 trillion won during the six-month period.

Musinsa attracted foreign customers from over 100 countries, with Chinese shoppers making up 32 percent and Japanese customers accounting for 27 percent of the international segment.

The fashion retailer’s sales rose 22.1 percent year-on-year to 670.5 billion won in the first half of the year.

Daiso reported that foreign customers comprise about half of all shoppers at its major outlets in Seoul’s popular shopping districts, including Myeong-dong, Dongdaemun and Hongdae.

Although the company has not yet disclosed its mid-year earnings for 2025, it posted a record 3.96 trillion won in sales for 2024.