South Korea powers up downtown duty-free sales as China tourism magnet

Wed Oct 8, 2014 7:15am EDT
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By Joyce Lee

SEOUL (Reuters) - Already the world's biggest duty-free market, South Korea said on Wednesday it will issue more licenses for downtown duty-free shops, doubling down on a strategy that has helped it outstrip regional rivals seeking to reel in shopaholic Chinese tourists.

Seoul-based Lotte Duty Free and Hotel Shilla (008770.KS: Quote), part of the Samsung Group [SAGR.UL], have been adept at luring mainland China shoppers by promoting in-vogue South Korean culture - known as the "Korean wave" - and products such as cosmetics and appliances. The tactic has helped turn the pair into the world's fourth- and eighth-largest duty free retailers by sales respectively.

Thanks to Chinese tourists' appetite for the luxury goods and, in particular, Korean items, South Korea overtook Britain in 2010 to become the world's largest duty-free market. In 2012, the last year for which full sales numbers are available globally, it raked in $5.86 billion in duty-free sales, or 11 percent of the global market, according to the Korea Customs Service.

"Lotte and Shilla's particular strength lies in their understanding of the North Asia traveler, the Koreans naturally but more particularly the Chinese and the Japanese," said Martin Moodie, an industry expert and chairman of the Moodie Report.

Korean cosmetics, he said, are "arguably the hottest category in travel retail worldwide".

South Korea is enjoying a wave of popularity with Chinese tourists, with visitor numbers on track to hit 6 million this year, up 39 percent from the 4.32 million arrivals in 2013, according to the Korea Tourism Organisation.

'I CAME TO SHOP'   Continued...

A woman leaves a shopping mall in central Seoul July 31, 2013. REUTERS/Kim Hong-Ji