Issue analysis, 6 months after Chinese THAAD retaliation…Distribution sector in worst situation - Myeongdong & Dongdaemun without Youke

Six months after the Chinese authorities banned the sale of tourist products in Korea, the dangers of duty-free shops in Myeongdong and Dongdaemun areas in Seoul were suspended. There was a bag-a-prize for their duty-free purchase when the group tourists left.

Lotte Duty Free Shop in Sogong-dong, Seoul, 9:20 am. Chinese people from the doorway on the 12th floor to the toilet in the back lined up and were awaiting entry around 10 minutes before the duty free shop was opened. They jumped together at 9:30 am and stood in front of premium cosmetics stores such as `Dior`, `SK II` and `Sulwhasoo`. The Duty Free Shop staff with a shoulder strap was busy putting up about 30 guests.

At a cosmetics store, clerks had no intention of stacking a red passport and responding to customers. Some of the customers were collecting KRW 50,000 in a bag and handing it to the clerk and making a large purchase. Shinsegae duty-free shop Myeongdong also had similar atmosphere. In front of the `Breath 37` store, which is popular among Chinese people, there were about 30 people lined up and waited for their turn. These are purchasing agents who buy goods in bulk from our duty-free shops and deliver them to China, called "Tai Gong." The number of Chinese (286,123) who visited China in July fell by 69.3% from the same period last year. However, foreigners` sales (US $ 699.31 million) increased by 8.8%.

Meanwhile SM Duty Free Shop and Dongdaemun Duty Free Store, which opened last year, were also in a dull atmosphere. The SM duty-free shop, which operated in six floors, had four floors. However, there were more customers without customers. The Duta Duty Free also reduced the number of sales from 9 to 7, but at noon the customer had to be pushed out. The streets of Myeongdong and Dongdaemun, where many Chinese tourists are visiting, were also annoying. A merchant who has been selling accessories for 5 years in Myeongdong said, "It is careful to speak as it is related to the political issue of the THAAD conflict. It is not helpful for the business to know that the business does not work well." Jin moo, who sells jerky in Myeongdong, said, "Foreigners and domestic customers account for 7: 3. The proportion of Chinese people is still large, but the absolute number of guests has definitely decreased."

The Korean-Chinese conflict has been prolonged, and the duties of the duty-free shops and major tourism trade traders are deepening with the recent addition of THAAD. In May, when the new government was introduced, it was expected that group tourism would normalize in the third quarter due to the change in the regime due to the regime change, but this is a problem due to North Korea`s nuclear and missile issues. First-tier Lotte Duty-Free Shop, operating profit (KRW 7.4 billion) fell by 96.8% YoY and operating profit of Shilla Duty Free (KRW 24.9 billion) fell by 42.2%. Tourists have reduced their rents while the duty-free market has become saturated, and even the airport duty-free shops have returned patents. Hanwha Galleria Time World decided to run the Jeju Airport duty free shop by the end of the year, and Lotte Duty Free Shop, the industry`s No. 1, is considering withdrawing from the Incheon Airport duty-free shop due to the aftermath of the Sad and the rent.

The duty-free shop industry is also tightening its operations by reducing salaries and manpower as the business environment deteriorates. At the Lotte Duty Free Shop, 40 team leaders and executives decided to return 10 % of their salary. Jeju Airport decided to withdraw from duty free shops as Hanwha Galleria decided to withdraw some of the salary and bonuses to its employees earlier this year, reducing the number of duty-shop employees from 200 to 120. Shinsegae DFE and Hyundai Department Store Group, which is scheduled to open duty-free shops by the end of this year, requested the KCS to delay the opening period by six months to one year.

A duty-free industry expert said, "There were many variables that were not present when companies compete in duty free shops due to changes in government policy and diplomatic relations. If the THAAD crisis does not improve, the move will also lead to the withdrawal of duty-free shops.”


By Park Min Yeong ironlung@


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