Korean duty-free shops hit by unfavorable exchange rate, limited inventory

The duty-free industry has been hoping that the end of COVID-19-related travel restrictions would help boost its sales. 

Even as international travel is returning to pre-pandemic levels, however, South Korean travelers are not so quick to return to their previous spending habits.

WALKING IN WITHOUT A WAIT

A duty-free shop in downtown Seoul was quite vacant on Friday.

There was no line to get into the Chanel boutique within the duty-free store; in sharp contrast to people queuing up around the corner at the same brand’s boutique inside a department store. 

Other high-end boutiques like Christian Dior and Gucci also weren't packed. 

A 34-year-old shopper who went into the Chanel boutique to buy a wallet came out empty-handed. “I was here last weekend too and liked that I don't have to wait in line like I’d have to at department stores.”

But the shopper added there wasn’t anything she wanted to buy.

The duty-free shops have been restocked in very limited quantities since the beginning of COVID-19. Most shoppers found it difficult to find any of the brand’s steady sellers at this particular boutique. 

“The situation will be more or less the same in a month or two,” a staff member told The Korea Economic Daily.

PRICE COMPETITIVENESS 

In addition to less inventory, the duty-free shops are also losing price competitiveness. 

With the weakening won against the US dollar, some items are more expensive at duty-free shops than at department stores. 

A Saint Laurent wallet that costs 520,000 won ($400) was about 70,000 won cheaper at the department store than at the duty-free shop. At the time of publishing, $1 is equivalent to 1,289 won. 

INVENTORY

Experts say it will be some time until the duty-free shops can beef up their inventories. 

Unlike the department stores, duty-free shops buy directly from the manufacturers to sell to customers. In other words, they are responsible for any items that do not sell.

Major duty-free chains in South Korea are being mindful of their overheads.

The travel retail department of Hotel Shilla, an operator of luxury hotels and duty-free shops, had 1.7 trillion won in assets in the first quarter of this year, down 1.4% from the previous quarter.

An industry insider said consumer sentiment at duty-free shops will bounce back to previous levels next year, adding “this year is more about preparing for that rebound.”

Write to Mikyoung Lee at capital@hankyung.com
Jee Abbey Lee edited this article.