Despite Increase in Foreign Visitors, Duty-Free Spending Declines

Despite a noticeable increase in foreign visitors to South Korea, the mood in the duty-free industry is not entirely positive. While the number of visitors to duty-free shops has risen, the average spending per person has actually decreased. In response, the industry is focusing on enhancing price competitiveness, expanding premium brands, and offering experiential content and VIP services to boost spending.
 
According to the Korea Duty Free Association, sales at domestic duty-free shops reached 1.1117 trillion won in May, a 5.6% increase compared to the same period last year. The number of buyers rose by 1.8% to 2.62 million. However, the trend among foreign consumers was different. In May, the number of foreign buyers increased by 3.0% to 1,229,264, but foreign sales fell by 2.5% to 857 billion won. Consequently, the average spending per foreign customer dropped from approximately 737,000 won in April to about 697,000 won in May, a decrease of 5.3%. This indicates that while tourist numbers are up, actual spending has contracted.
 
Industry experts attribute this decline to changes in foreign consumer behavior. There is a growing trend for foreign visitors to shop directly in areas like Myeongdong, Seongsu, and Hannam-dong, with stores like Olive Young, Daiso, and Musinsa becoming essential shopping destinations for foreigners, leading to a reduced focus on duty-free shops.
 
In response, the duty-free industry is working hard to secure price competitiveness. Lotte, Shilla, Shinsegae, and Hyundai Duty Free have recently raised their internal exchange rate for domestic brand products from 1,450 won to 1,500 won. This adjustment is seen as a necessary measure to maintain the price competitiveness of domestic brands amid prolonged high exchange rates. As the exchange rate increases, the dollar-based selling price decreases, which could result in a perceived price reduction of about 3-4% for foreign customers.
 
VIP customer services are also being enhanced. Shinsegae Duty Free officially launched its premium pickup service, the 'Airport Mobility Service,' on July 13. Customers traveling abroad can book a vehicle to transport them comfortably between their homes and the airport at their preferred time and location, with professional drivers providing the service. Lotte Duty Free has partnered with the luxury travel concierge platform 'Paris Class' since May to offer one-on-one premium travel concierge services for VIP customers.
 
Shinsegae Duty Free is also targeting young international tourists with experiential content, such as a pop-up featuring AI wearable products at its Myeongdong store.
 
An industry representative stated, "The previous structure where some customers purchased high-priced items in bulk is gradually weakening. Strategies that enhance price competitiveness, premium brands, experiential content, and VIP services will become increasingly important for increasing customer dwell time and conversion rates in the future."