Duty-free area in Incheon International Airport (Image courtesy of Yonhap)
SEOUL, Aug. 19 (Korea Bizwire) – With South Korea’s major duty-free retailers struggling to overcome a prolonged sales slump, they are increasingly turning their attention to an often overlooked demographic: domestic customers.
With the summer travel season in full swing, these shops are launching aggressive marketing campaigns, including lavish prize drawings, to capture the wallets of South Korean travelers before they head abroad.
According to the Korea Duty Free Shops Association, domestic customers accounted for approximately 20% of the industry’s total sales in the first half of 2024, generating 1.54 trillion won out of the total 7.39 trillion won.
While foreign shoppers still dominate the market, accounting for 80% of sales, the growth in domestic customer spending — up 24.8% year-on-year — offers a glimmer of hope for the beleaguered industry.
“Summer vacationers heading overseas are all potential customers,” said a duty-free shop official who spoke on condition of anonymity. “That’s why duty-free shops are rolling out various events to attract domestic customers.”
Leading the charge is Shinsegae Duty Free, which is running a “Check-in with Shinsegae” promotion until August 22.
The grand prize? A month-long stay in Paris for four people. The package, valued at approximately 25 million won, includes round-trip airfare and accommodation.
Any customer who spends at least $1 at Shinsegae’s online or offline stores is eligible to enter the drawing.
Not to be outdone, Lotte Duty Free is offering its own promotion until September 9.
Customers at its Myeongdong and World Tower locations can earn entries based on their purchase amounts, with prizes including accommodation and dining vouchers for the Inspire Resort on Yeongjong Island, Incheon.
Shilla Duty Free, another major player, recently concluded a promotion offering prizes such as Hyundai’s new Casper Electric car and hotel stays at Shilla Stay properties.
The company is also providing a 100,000 won discount coupon on the down payment for Casper Electric purchases made by Shilla Duty Free members.
These aggressive marketing tactics come as the duty-free industry grapples with changing dynamics in its customer base.
While foreign shoppers, particularly Chinese tourists and resellers drive the bulk of sales, their impact on profit margins is less significant due to associated costs such as commission fees paid to travel agencies.
In contrast, domestic customers and Chinese group tourists tend to be more profitable. As such, capturing a larger share of South Korean travelers’ pre-trip spending has become a key strategy for duty-free retailers looking to weather the current economic storm.
Ashley Song (ashley@koreabizwire.com)
