"Spring Vibes in Full Swing..." Duty-Free Industry Still Faces Cold Winds

January Domestic Duty-Free Sales Reach 1.1619 Trillion Won
Lowest Level Since June 2020
Industry Calls for "Urgent Additional Support Including Duty-Free Allowance Increase"
"Need for Proactive Preparation to Welcome Foreigners" Appeals

[Image source=Yonhap News]

As the weather warms ahead of Gyeongchip on the 5th, crowds are flocking to department stores and outlets in the distribution industry, but the duty-free industry is still facing a cold wind.

According to the Korea Duty Free Shop Association on the 3rd, domestic duty-free sales in January amounted to 1.1619 trillion won. This is the lowest level since June 2020 (1.113 trillion won). The impact of a surge in COVID-19 cases due to the Omicron variant continues, and with China controlling entry and exit ahead of the Beijing Winter Olympics, purchases by Chinese traders (Daigou), who are major buyers in the industry, were limited.

The number of foreign visitors was 51,319, the lowest since September last year (47,921). Sales generated by these visitors also recorded the lowest figure since June 2020 (1.0665 trillion won), at 1.0771 trillion won. Domestic sales were around 84.8 billion won, slightly up from the previous month (80.6 billion won), but this was not considered a significant increase. This trend was expected to continue into February due to a worsening surge in cases and fewer business days. A duty-free industry insider said, "Although relatively improved results are expected after the Olympics, the business remains confined within a box range dependent on Daigou movements, so mid- to long-term business concerns persist."

The "emergency situation due to COVID-19" has continued for three years, deepening the industry's worries. Last year, the second year of COVID-19, domestic duty-free sales recorded 17.8333 trillion won. This was a 15.0% increase compared to 2020, the first year of the pandemic (15.5051 trillion won), but still only 71.7% of the pre-COVID-19 level in 2019 (24.8586 trillion won). During this period, monthly domestic duty-free sales generally remained between 1 trillion and 1.6 trillion won. Although there was a movement toward phased daily life recovery (With COVID) in the second half of last year, with sales reaching 1.7 trillion won in September and November, the momentum did not hold, and sales fell back to just above 1 trillion won.

The industry's concern also stems from the growing dependence on Daigou sales, which carry high commission burdens, as overseas business and general tourist visits have ceased. Last year, foreign sales amounted to 17.0054 trillion won, exceeding 95.3% of total sales, most of which the industry explained as Daigou sales. A duty-free industry insider said, "Practical additional support such as raising the domestic duty-free allowance is urgently needed." Kim Tae-ho, Vice President of Hotel Shilla, who took office as the new chairman of the Duty Free Shop Association on the 1st, also expressed his intention to actively address industry issues amid the prolonged COVID-19 crisis. He emphasized "the urgent recovery of the duty-free industry" and "securing new growth engines," stating, "If we fail to adapt or respond properly to the changes demanded by the times, we cannot guarantee the future."

Along with the duty-free industry, the tourism and leisure sectors, which are also heavily influenced by foreign tourists, are raising their voices. "Although the situation is tough, we must at least prepare to welcome overseas travelers," they say. The Jeju Chamber of Commerce and Industry and the Jeju Special Self-Governing Province Tourism Association issued an appeal on the 28th of last month, urging the government to reinstate the visa-free entry system and resume international flights. The visa-free entry system, introduced in 2002 to attract tourists, allows foreigners of nationalities excluding terrorist-supporting countries to stay for one month without a visa, but it was temporarily suspended due to the spread of COVID-19. The suspension of international flights operating from Jeju International Airport also dealt a heavy blow to related industries in Jeju, including duty-free shops, foreign casinos, travel agencies, and restaurants. The two organizations emphasized, "As a preemptive measure to prepare for the recovery of the global tourism market and the transition to With COVID, it is necessary to resume visa-free entry, promptly resume international flights, and lift self-quarantine for foreign tourists upon entry. If borders are opened too late, we will already be left behind in global competition, so it is time to prepare proactively for survival."