Sales at duty-free shops in South Korea slumped in June, when the number of Chinese tourists surged more than threefold from February, before China reopened its borders.
Industry watchers say sales have shown little sign of picking up this year despite a pick-up in the number of Chinese tourists. China has excluded South Korea from overseas destinations for group tours amid strained diplomatic relations between the two countries.
A total of 168,000 Chinese visited South Korea in June, compared with 46,000 in February, according to the Korea Tourism Organization.
However, sales at the country’s duty-free shops fell 8.9% to 854.3 billion won ($660 million) in June from 938.1 billion won the previous month, according to the Korea Duty Free Shops Association. Revenue fell 35.8% year-over-year in June.
According to the South Korean embassy in China on Tuesday, the number of visas issued to Chinese in June had returned to pre-pandemic levels.
In the same month, South Korea issued a total of 114,109 visas to Chinese tourists, up from 112,170 in June 2019. In terms of the number of tourists visiting South Korea in June last year, China ranked second after Japan.
This time, the vast majority of Chinese tourists are individual tourists, who tend to be tourists on a limited budget due to China’s ban on group tours to South Korea.
Chinese tourists traveling in package tours used to snap up packs of duty-free cosmetics and bags to resell to local Chinese for a profit.
“The consumption of Chinese individual tourists is one-third of that of group tourists,” said a staff member at a duty-free shop in Seoul.
“They are more interested in going to restaurants, cafes and tourist attractions than shopping.”
Patriotic spending by young Chinese consumers, or a preference for local brands over foreign products, is also one of the reasons Chinese tourists are spending less in South Korea.
According to Chinese customs statistics, as of July this year, China’s imports of Korean cosmetics have declined for the fourth consecutive month.
To fill the void left by Chinese tourists, duty-free shops are turning to Southeast Asian tourists.
In the first quarter of this year, the number of foreign tourists from Vietnam, Thailand and Taiwan increased by 3.5 times compared to the same month in 2022.
Lotte, The Shilla and Shinsegae, the three major duty-free shop operators, have prepared product leaflets in Vietnamese, Thai and other Southeast Asian languages. They set up a reception to serve them.
Also, their priority is to increase profits, not increase sales.
They are negotiating with tour operators and tour guides to lower the fees they pay to attract Chinese groups to their stores.
The Shilla Duty Free’s second-quarter results appeared to reflect such efforts, industry watchers said.
Its operating profit nearly tripled to 43.2 billion won from 14.8 billion won the previous year. Sales fell 30% year-on-year to 708.1 billion won.
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Kim Yeon Hee edited this post
