“Recommend a whiskey for a gift.” ChatGPT selects personalized products for customers, while artificial intelligence (AI) and robots manage the logistics of duty-free goods according to departure times. This is the landscape of South Korea's duty-free shops, which are expanding the application of AI from product exploration and purchasing to logistics. The strategy aims to enhance customer convenience, increase conversion rates, and reduce repetitive tasks and logistics costs.
According to industry sources, Lotte Duty-Free introduced the country’s first ChatGPT-based conversational shopping service in mid-July. Customers can browse products within ChatGPT without needing to install a separate application or first access the Lotte Internet Duty-Free site.
When customers input requests like “Show me the best-selling perfumes” or “What are today’s special offers?” the AI suggests products that meet their needs. The recommended items link to the Lotte Duty-Free purchase page, where customers can view detailed information and make purchases. Lotte Duty-Free plans to enhance its personalized recommendation feature by accumulating service usage data that reflects customers' budgets and purchasing goals.
Shilla Duty-Free has advanced its online search service using generative AI and vector embedding technology. This technology connects words and products with similar meanings, even if expressed differently. For example, customers can input a product's purpose or features instead of its name, and the system will find products that closely match their search intent. A representative from Shilla Duty-Free stated, “We have implemented meaning-based search that understands customer intent and context, moving beyond simple keyword matching, and improved accuracy by recognizing synonyms, similar words, typos, and Korean-English conversion searches.”
Shinsegae Duty-Free is enhancing both customer-facing online services and backend logistics. It is using generative AI to create key campaign images and video content internally, while also strengthening AI-based product recommendations and search functions on its online mall. Notably, it is collaborating with LG Electronics to develop an AI-based smart logistics system. This system will automate the entire logistics process from ordering to receiving, inspecting, picking, and shipping, incorporating mobile robots, real-time data analysis, and a digital twin-based control system. The focus is on improving logistics speed and product delivery reliability, considering the unique characteristics of duty-free operations that require timely delivery.
Hyundai Duty-Free has integrated AI into its experiential services at offline stores. From January to April this year, it operated the 'AI Beauty Trip' at its Trade Center location, analyzing customers' face shapes, personal colors, and skin conditions such as pores, oiliness, and wrinkles to recommend suitable products from about 800 items across 36 brands. Customers could check their diagnostic results and recommended products via a QR code.
A representative from Hyundai Duty-Free noted, “The diagnostic results are provided in a QR code-based report format, which can also be accessed in foreign languages like Chinese, receiving positive feedback from international customers,” adding that they are considering reintroducing the AI Beauty Trip service in the future.
The rapid adoption of AI in the duty-free industry is driven by a slowdown in domestic consumer spending and market stagnation, prompting a focus on 'internal management.' With the market's growth hitting a limit, companies aim to reduce costs and maximize efficiency through digital technology. According to the Korea Duty-Free Association, domestic sales at duty-free shops fell from 284.2 billion won in January to 257.6 billion won in February and 231.2 billion won in March, marking two consecutive months of decline. Although sales rebounded slightly to 239.7 billion won in April and 254.6 billion won in May, they still remain below early year levels.
An industry insider remarked, “In a stagnant domestic duty-free market, breaking the high-cost structure and enhancing per capita productivity through technology is essential for survival. The digital transformation utilizing AI will determine the competitiveness of duty-free shops in the future.”
* This article has been translated by AI.
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