SOUTH KOREA. Duty free sales reached KW1.38 trillion (US$1.23 billion) in January, up +16.7% month-on-month but around -30% short of pre-pandemic levels, the Korea Duty Free Association (KDFA) revealed yesterday. As reported, sales reached US$1.74 billion in January 2020, with the COVID-19 outbreak only impacting sales in the final week of that month.
59,627 foreign buyers (mostly daigou traders) generated KW1.34 trillion (US$1.19 billion) in sales this January. The average transaction value by those foreign shoppers was around KW22.5 million (US$19,995), underlining the transactional nature of the current Korean duty free business. That compared with US$13,698 in December, and was driven by daigou groups buying heavily for the peak Chinese New Year holiday period.
Only 284,356 Koreans purchased duty free in January – the second-lowest monthly tally since the pandemic began, KDFA said.
Local Korean media title TRNDF noted that senior Korean duty free retailers remain deeply concerned about recent Chinese crackdowns on daigou shipments into Mainland China through Shenzhen’s famed Mingtong market. While there have many similar periodic efforts in the past, the latest – a major swoop on Mingtong Digital City Market in January – particularly spooked Korean retailers and sector investors. According to a Ming Tong Market and Shopping Association announcement on 22 January, no unregistered business entity can now trade large quantities of duty free goods without paying taxes. Ming Tong Digital City Market is closed from 1 to 28 February.
While the recent crackdown did not impact January sales negatively, February might be a different matter, TRNDF said.
With Hainan’s offshore duty free sector in China hitting new heights in January, up by +143.6% year-on-year to CNY3.78 billion (US$585.6 million), the power balance between these two key inter-related markets is continuing to tilt in the latter’s favour. China’s will and ability to repatriate foreign spending from abroad has a clear and obvious soft target – what has for years been the world’s biggest duty free market, South Korea.