Duty-free shops bustling as Chinese tourists return, but halcyon days over, experts warn

Tourists queue outside the Lotte Duty Free store in central Seoul on Nov. 20 [YONHAP]

[NEWS ANALYSIS] 
 
Walking around the Lotte Duty Free and Shinsegae Duty Free stores in central Seoul on a December weekday felt like stepping back in time to the heyday of the duty-free industry, when shops were filled with Chinese tourists. Chinese was heard throughout the shops as customers handed their red Chinese passports to cashiers at MLB clothing stores, cosmetic brand stores and sunglasses booths. 


Chinese tourists are flocking to Korea, and the duty-free industry is enjoying a revenue bounce-back — for the time being.
 
The temporary visa waiver program for Chinese group tourists, which began Sept. 29, alongside the ongoing diplomatic dispute between China and Japan, is leading more and more Chinese tourists to choose Korea as their next overseas travel destination. This had major Korean duty-free firms like Lotte Duty Free and Shinsegae Duty Free reporting a significant increase in revenue in November compared to the same period the previous year. But the numbers are still likely lower than the figures recorded during the prime days of Korean duty-free, before Covid-19.
 

Shinsegae Duty Free store in central Seoul on Sept. 30. [YONHAP]

 
The growing number of Chinese tourists and the rise in visitors to duty-free stores were instantly recognizable when visiting the Lotte Duty Free store and Shinsegae Duty Free store, both in Jung District, central Seoul, on Friday.
 
Even though it was a weekday afternoon, both duty-free stores had many customers looking to purchase cosmetics, sunglasses and clothes — a scene completely different from just a few years ago, when brick-and-mortar duty-free stores were virtually empty. While Korean, Taiwanese and Japanese people could be seen at the store, the red Chinese passport seemed to be the most prevalent, at least among the customers who handed their passports to the cashiers.
 
Notably, the MLB clothing store, full of Chinese customers, had rope lines around the store to regulate customer entry.
 
“We had to install the rope lines because we often didn’t have enough staff members to receive all the customers,” the staff member, who was busy answering customers' questions regarding prices and discounts in Chinese, told the Korea JoongAng Daily briefly.
 

Customers shop at the MLB store in Lotte Duty Free in central Seoul in December. [CHO YONG-JUN]

 
Some 472,000 Chinese tourists visited Korea in October, a 20.5 percent on-year increase, according to data released by the Korea Tourism Organization on Nov. 28.
 
That number was about 83.2 percent of its October 2019 level, according to the agency, indicating that the number of Chinese tourists visiting Korea was bouncing back to pre-Covid levels, albeit more slowly than travelers from other nations, who have already surpassed the 2019 numbers.
 
In the same month, Shinsegae Duty Free reported that its October revenue jumped 40 percent compared to the same time in 2024.
 
But not all Chinese tourists are group tourists coming to Korea under the temporary visa waiver program, as proven in figures from duty-free stores: Lotte Duty Free said the revenue generated by independent Chinese travelers — categorized in the industry as fully independent travelers or FIT — rose 50 percent on-year in November, faster than FIT from other countries.
  
Similarly, at Shinsegae Duty Free, revenue from Chinese independent travelers rose 30 percent on-year in November at its Myeong-dong branch.
 
Nevertheless, duty-free shops have a long way to go, according to Sookmyung Women’s University Business Administration Professor Suh Yong-gu.
 
“The duty-free industry will unlikely bounce back to its prime days, even if the recent numbers have risen,” Suh said at a seminar on the future of Korea's duty-free industry on Saturday, where speakers called on duty-free companies to innovate to survive in an uncertain future.
 
Explaining that the “days of Chinese group customers queuing up in duty-free stores to buy Korean cosmetics are over,” Suh said that although more Chinese tourists are coming to Korea, even more go to Hainan Island in China — where Chinese customers can purchase a total of 100,000 yuan ($14,100) of duty-free items per year — making Korean duty-free less attractive.
 

Customers shop at an Olive Young store in Seoul in November [YONHAP]

 
In Korea, too, tourists are heading to brand stores across the country that offer tax return services instead of visiting old-fashioned duty-free stores. Olive Young, a new must-visit tourist destination, said the revenue generated by foreign tourists from January to November had already surpassed 1 trillion won, an increase of 26-fold compared to 2022 figures.
 
The duty-free firms have attempted to differentiate their offerings.
 
Shinsegae Duty Free has focused on its Incheon Airport duty-free store, introducing new luxury brands like Louis Vuitton and Celine in Terminal 2 and expanding its Dior store in Terminal 1, believing individual customers are more likely to use airport duty-free stores than stores outside the airport. Hyundai Duty Free has invited Matin Kim to its duty-free store in 2024.
 
“Myeong-dong, Gangnam Coex and obviously airports are all places that tourists will go to, so duty-free stores still have a huge advantage in accessibility,” Professor Suh said. “It’s now down to the operators to attract the customers.” 
 

BY CHO YONG-JUN [cho.yongjun1@joongang.co.kr]