Cosmetics sales surge as Korean duty free market rockets +33.5% to US$10.5 billion : Moodie Davitt Report

SOUTH KOREA. The Korean duty free market surged by 33.5% year-on-year in 2016 to KW12.2 trillion (US$10.5 billion), according to new figures from Korea Customs Service.

The results, first unveiled by our close colleagues at KDF News*, reflect a strong bounce-back from the MERS-ravaged 2015, allied to booming Chinese visitor numbers last year.

Chinese arrivals for 2016 rose +34.8% to 8,067,722, according to Korea Tourism Organization figures published today, a 46.8% share of total visitors. Japanese arrivals also rose sharply, up +25% to 2,297,893, a 13.3% share of total arrivals. Korean departures rose +15.9% in the year to 22,383,190

Duty free sales to foreigners (dominated by the Chinese followed by Japanese) rose +44.1% to KW8.8 trillion (US$7.5 billion)

Cosmetics, driven by booming sales of skincare (particularly Korean brands), accounted for 51.2% of turnover. Here are the leading categories:

Korea_Table_600 — Cosmetics, spurred by the rapid growth of Korean skincare brand sales to young Chinese shoppers, now accounts for over half the duty free market

Lotte Duty Free stretched its lead as the dominant force, racking up a +26% increase in sales to KW5.973 trillion (US$5.1 billion), a stunning performance given that the retailer had to close down its Lotte World Tower Duty Free store in late June.

Lotte’s sales by outlet were:
– Seoul flagship store: KW3.160 trillion (US$2.7 billion)
– Incheon International Airport: KW1.145 trillion (US$980.1 million)
– Jeju KW0.489 trillion: (US$418.6 million)
– Coex, Seoul: KW0.387 trillion (US$331.3 million)
– Lotte World Tower (closed from 26 June 2016): KW0.347 trillion (US$297 million)
– Busan: KW0.3458 trillion (US$296 million)

[LDF]Main Store 12F_1 — Lotte Duty Free’s superb new beauty floor at its flagship store in Myeong-dong, Seoul helped the company grow its business by +26% despite having to close down the Lotte World store on 26 June

Lotte’s nearest rival, The Shilla Duty Free, posted a +31.5% increase year-on-year to KW3.405 trillion (US$2.9 billion). Its Seoul flagship generated revenues of KW1.739 trillion (US$1.49 billion) while its Incheon International Airport stores posted sales of KW0.697 trillion (US$596.7 million)

P1170783 — Despite severe capacity pressures at its Seoul flagship, The Shilla Duty Free posted a +31.5% sales increase year-on-year across its estate

Fast-rising Shinsegae Duty Free posted sales of KW0.9608 trillion (US$822.4 million). Its new store in Myeong-dong, Seoul, which only opened on 1 May, generated sales of KW0.349 trillion (US$298.7 million). Its downtown Busan store (relocated in March to Centum City) posted revenues of KW0.336 trillion (US$287.8 million). Dongwha Duty Free in Seoul posted sales of KW0.3547 trillion (US$306 million)

Shinsegae Duty Free, Seoul — Rip-roaring start: Sales at Shinsegae Duty Free’s first downtown store in Seoul have picked up rapidly since the May opening. The retailer will open a second store in the South Korean capital next year.

visitor purpose accum2016 — Selected visitor arrivals to South Korea by purpose 2016; Note the dominance of tour group visitors among Chinese arrivals. Source: Korea Tourism Organization

visitor ag accum2016 — Selected visitor arrivals to South Korea by age 2016; Source: Korea Tourism Organization

visitor gender accum2016 — Selected visitor arrivals to South Korea by gender for 2016; Source: Korea Tourism Organization

Of the recent sector newcomers HDC Shilla generated sales of KW0.3971 trillion (US$340 million); Galleria 63 Duty Free reached KW0.224 trillion (US$191.7 million), Doota Duty Dree KW0.111 trillion (US$95 million) and SM (Hana Tour) KW0.056 trillion (US$47.9 million).

Other results of interest included the Dufry ThomasJulie alliance at Gimhae International Airport in Busan with sales equating to US$68 million, while JTC’s domestic duty free operation at Jeju Airport (for Korean passengers) posted impressive sales of US$450.1 million.

*NOTE: The Moodie Davitt Report and KDF News have a highly successful, exclusive information-sharing partnership.

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