[Korea duty-free in 2019] Downtown duty-free sales also dropped, but it wasn't as bad as a departure duty-free

기사입력 : 2020-07-16 15:59:12 안상준 기자
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Also Korea’s downtown duty-free has had the direct impact from the COVID-19 pandemic situation. The scene of the customers lining up until the opening of the duty-free shop has disappeared rapidly from the beginning of February. Instead of the waiting ques in the front of Lotte Myeongdong, Shinsegae Myeongdong, and Shilla Seoul, online duty-free began to rapidly re-filled the gap mainly by the Big 3 operators. 

 

Korea Customs Service, the supervisory authority of duty-free business, postponed the starting of the export pick-up counter, which was previously scheduled to be introduced on February 1st. In addition, on February 14th, the measures to restrict duty-free purchase quantity were eased. Korea Customs Service said on the postponement of the export pick-up counter system, “it will be temporarily eased to overcome the crisis in the duty-free industry that is facing the sales cliffs”.
 

Despite the prompt actions taken by the government including Korea Customs Service, the plunge of duty-free shoppers gave a huge and direct impact on the decline of downtown duty-free sales. ‘Korea Duty Free Shops Association’ compared the 2-week performance from January 20th until February 2nd 2020 in which the COVID-19 began to spread, with the same period of previous year. During this period, the downtown duty-free showed the sharp decline of 38.95% in customer number and 27.1% in sales.

▲ Infographic = Hae Young Yuk

Even at this period, the departure duty free was not as worse as the downtown duty-free. At the departure duty-free, the customer number fell by 24.45% and the sales fell by 19.75%. With the accelerated spread of COVID-19, the situation in downtown duty-free has worsened. Some duty-free operators even had to close their shops in the case of the confirmed patient’s visit, accepting the zero sales during this closure. However downtown duty-free began to defend the sales by using online channel more aggressively.


Before the global pandemic was officially announced, Korean government launched a social distancing campaign in February 2020. Many companies joined the campaign to let their employees work at home. Duty-free companies have also begun ‘working at home’ using the online communication systems, starting from February and early March for about 2 to 3 weeks. Downtown duty-free moved their focus from face-to-face offline sales to more online sales as a response measure. 


Online duty-free has the distinctive features such as ‘discount coupons’, ‘loyalty credit points’8 and active promotions by each brand and product-wise. The rapidly growing online duty-free is now being used as an important alternative sales channel in the time of inactive offline operation.
 

“Around 45% of consumers place the order in the online duty-free even before they purchase the flight tickets in order to get the highly beneficial price offer from the online. The pattern of travel is also changing by this customer behavior when the best offer is listed in the web-site. These offers are widely known to Chinese consumers too. Therefore, the trend of pre-buying before entering Korea through the Chinese language online duty-free is also a widely known shopping pattern”. A Lotte Duty Free marketing manager said.

 

Korea Duty Free Shops Association issued an urgent industry request to the government on March 13th to relieve the situation of COVID-19 impact. According to the request, the sales status of the Big 3 duty-free operators in the 1st quarter of 2020 was disastrous. In the case of Lotte Duty Free, from January to March 2020, sales at their downtown duty-free was decreased by KRW 400 billion, and their airport duty free sales loss was KRW 55 billion. Shilla Duty Free also said that their downtown duty-free loss was about KRW 90 billion and their airport duty-free sales loss was KRW 60 billion. In the case of Shinsegae Duty Free, the daily average sales at their downtown sales decrease was about 52% Y-O-Y, and their airport sales loss was about 75% in the same period. However, they said that if the current COVID-19 situation is worsened, the sales at downtown duty-free will drop further and the departure duty-free sales will drop more significantly. 


There is also a hope. As more than a month is passed after the stopping of Daigou trade, the inventory in China, which was brought before the Chinese New Years Day, is now running up. For this reason, if the COVID-19 in mainland China is stabilized as well as the airline service between China and Korea resumes, the suppressed demand may explode and recover the sales within a short period of time. It is also because that Korean and Chinese shared the emotional connection through the various supports exchanged in the early stage of COVID-19. Therefore, once the spread of COVID-19 in the East Asian region is gradually ceased, it is expected that large-quantity B2B transactions of duty-free goods across the countries will come back quickly.

[저작권자ⓒ (주)티알앤디에프뉴스. 무단전재-재배포 금지]

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