Korean duty-free shops hit hard by China’s THAAD retaliation

2017.03.20 16:52:37 | 2017.03.20 17:09:46
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Lotte Duty Free shop in Seoul on Sunday stayed very quiet without Chinese group tourists. [By Kim Yoo-tae]

Lotte Duty Free shop in Seoul on Sunday stayed very quiet without Chinese group tourists. [By Kim Yoo-tae]

China’s economic retaliation against South Korea’s deployment of U.S. antimissile system has taken a heavy toll on the Korean duty-free industry as the Chinese that had been its biggest customers have stopped coming after a de facto travel ban.

Sales at Lotte Duty Free, Korea’s largest and world’s third largest travel retailer, over the last weekend plummeted by more than 30 percent due to the loss of Chinese tour groups, according to a Lotte Duty Free official. The company fears the latest sales drop would reach or surpass the rate it saw in 2003 when it experienced its first sales drop since its inception in 1980. At that time, its sales nosedived 16.6 percent on year following the outbreak of severe acute respiratory syndrome (SARS) that prevented Chinese and Japanese tourists from traveling to other Asian countries.

Earlier this month the Chinese tourism authority issued a verbal order to travel agencies to stop selling group and individual trips to Korea.

Chinese visitors on average have been responsible for 60 percent to 80 percent of revenue at duty-free shops in Korea. Other nationals - the Japanese, Southeast Asians, and others - contribute just 5 percent of their sales.

Tax-free shops in Seoul and in airports generated sales of 12.3 trillion won ($11.3 billion) last year. The lion’s share of 70 percent came from the pockets of the Chinese. If the group travel ban cuts the number of Chinese visitor by 50 percent, their revenue could be wiped out by 4.3 trillion won.

The dearth of Chinese visitors would likely deal as a bigger blow to fledgling shops that had gained new business license over the last two years. Duty-free shops have doubled from two years ago.

By Sohn Il-seon and Kim Yoo-tae

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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