SOUTH KOREA. French luxury house Chanel is set to close its downtown duty free boutiques in Busan and Jeju from late March, according to a well-sourced report in The Korea Herald.
“The era of luxury downtown duty free in Korea is now fading”
If verified – The Moodie Davitt Report approached Chanel Korea for confirmation in December over growing market rumours of a withdrawal and is seeking comment on today’s report – the decision will be a further blow to Lotte Duty Free (Busan) and The Shilla Duty Free (Jeju). As reported, fellow luxury house Louis Vuitton opted to withdraw from its Jeju operation (Shilla) and Lotte Duty Free boutiques in Busan and Lotte World, Seoul.
As revealed by The Moodie Davitt Report, that will leave just three Louis Vuitton duty free boutiques in Seoul, and those will close progressively between October this year and March 2023.
The Korea Herald noted that luxury watch brand Rolex shut seven out of its ten Korean duty free stores in late 2021, leaving its presence confined to Lotte World Tower, The Shilla Duty Free in Jeju and Incheon International Airport.
“The era of luxury downtown duty free in Korea is now fading,” one veteran travel retail executive told The Moodie Davitt Report.
“The absence of high-end luxury is the new normal of downtown duty free. I guess the reason is not only the pandemic but also from luxury brands’ desire to eliminate the double-price structure in the downtown retail market. Also, the fast growth of the market inside China, including airport duty free, helps them to expedite the evacuation from Korea downtown duty free.’
The Korea Herald cited the profound structural change in the Korean duty free market of recent years, accelerated by the pandemic, which has resulted in the channel being overwhelmingly dominated by Chinese daigou resellers.
As revealed by The Moodie Davitt Report, in 2021 the pandemic-hit channel was once again driven by sales to foreign customers who generated 95.4% of total revenue (up from 94% in 2020). Almost all of that activity was through reseller activity.
