Doosan Group’s duty-free outlet at Doosan Tower in Seoul. (image: Doosan Group)
SEOUL, Oct. 30 (Korea Bizwire) — Duty-free shops are shutting down as sales have plunged.
Doosan Corp., the holding company of South Korean conglomerate Doosan Group, announced on Tuesday that it will shut down its duty-free shops located in Seoul’s Doosan Tower.
This is the second time a duty-free store decided to withdraw from business before the expiration of a duty-free business license, after Hanwha Galleria in April.
Doosan decided to return its duty-free business license due to difficulties in improving long-term profitability.
Doota Duty-free Store, opened in May 2016, has grown to record annual sales of 700 billion won (US$598 million), but a sharp decline in the number of Chinese tourists and excessive competition among duty-free shops became the largest obstacles to maintain profitability.
There are currently 12 duty-free shops in downtown Seoul, which is twice as many as in 2015.
The diplomatic dispute between China and Korea over a THAAD (Terminal High Altitude Area Defense) missile defense system resulted in a steep drop in the number of Chinese tourists coming to South Korea.
They have been replaced by small groups of Chinese street peddlers.
Duty-free shops have been paying as much as 30 percent of sales to Chinese tour agencies to compete over bringing Chinese tourists to Korea.
While large-sized duty-free shops have managed to overcome excessive marketing costs by exercising their buying power to lower the unit price of each product, smaller duty-free shops have failed to avoid deficits.
Among duty-free shops in downtown Seoul, the Big 3 — comprised of Lotte, Shilla, and Shinsegae — account for over 80 percent of the market share.
The South Korean government, however, plans to authorize six new duty-free shops to open in Seoul and Incheon next month, which is seen by the industry as a bad move that will only exacerbate the already fierce competition.
Almost all duty-free shops, excluding the Big 3, are struggling from poor performance, leading many to expect that more shops will throw in the towel.
H. M. Kang (hmkang@koreabizwire.com)
