Korean duty free sales rise +37% month-on-month in February as daigou business revives

SOUTH KOREA. Duty free sales in the world’s biggest duty free market surged almost +37% month-on-month from a troubled January to KRW1.09 trillion (US$838.9 million) in February, according to the Korea Duty Free Shops Association.

A big spike in spending by foreigners – up some +50% to KRW894.6 billion (US$688.6 million) – drove the increase.

The figures show a drop in total shopper numbers but a rise in spending volume, implying a sharp increase in sales to daigou resellers in February. Foreign shoppers numbered 209,653, down from January’s 245,313,

February sales (in Korean Won above and US$ below) and visitor numbers show a hike in revenue and a drop in shopper numbers. The implict enhanced average transaction value is down to an increase in daigou custom over a troubled January. Note: Colour coding above from left to right denotes: Sales to foreigners; Sales to Koreans; Foreign shoppers; Korean shoppers {All charts courtesy of Korea Duty Free Association. Click to expand.}

As reported, January sales slumped dramatically to KRW797.4 billion (US$603.6 million) in the wake of a late-2022 Korea Customs Service (KCS) warning about high commission rates being paid to travel agencies facilitating bulk daigou reselling into China.

Commenting on the February spike, sources told The Moodie Davitt Report that retailers had clearly pushed the daigou business and its related travel agency commissions hard in the month. The question is, what happens next?” one senior industry stakeholder told us. Currently, another source pointed out, there is no law regulating the commission rate; instead it is just a case of the KCS issuing guidelines.

There is no obligation for retailers to report to KCS about the commission rate – it’s just a gentlemen’s agreement,” he said.  It is understood that the KCS spoke again to retailer representatives last week with the commission issue tabled once more. March figures will be closely watched as a result, a source said.

Sales (in Korean Won above and US$ below) and shopper numbers for the past three months. Note the drastic slump in sales to foreigners (almost all daigou resellers) after the Korea Customs Service edict in December. {Source: Korea Duty Free Association. Click on images to expand.}

 

As reported, South Korea resumed issuing short-term visas for Chinese visitors on 10 February, prompting a reciprocal move by Beijing, effective 18 February. ✈

Click on the image to read the Yonhap News Agency report

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