CJ Olive Young Seongsu (Image courtesy of Yonhap)
SEOUL, Dec. 3 (Korea Bizwire) – South Korea’s duty-free sector is grappling with declining performance as foreign tourists increasingly favor road shops and specialty stores, such as health and beauty retailer Olive Young, over traditional duty-free outlets.
This trend was highlighted at the “2025 Retail Industry Outlook Seminar” held by the Korea Chamber of Commerce and Industry on November 2.
Yoo Jung-hyun, an analyst at Daishin Securities, noted that the shift in tourist shopping habits is reshaping the retail market. “Foreigners are moving from city duty-free stores to Olive Young, where sales are projected to grow by about 30% year-over-year in 2024, while the duty-free sector continues to underperform,” Yoo said.
This trend has been exacerbated by changes in the profile of foreign shoppers. According to Hwang Sun-kyu of the Korea Duty-Free Shops Association, “The customer base has shifted from bulk-buying groups to individual travelers who now prioritize experiential tourism, like gastronomy, over shopping. Many are opting for road shops instead of duty-free stores.”
The outlook for 2025 remains challenging for the duty-free industry. Hwang warned of headwinds, including reduced Chinese tourist inflows amid economic uncertainties and competition from China’s expanding domestic duty-free market.
Department Stores Adapt with New Strategies
Department stores are also evolving to counteract economic challenges. Key survival strategies include rebranding and creating “town-like” complexes that integrate retail, entertainment, and hospitality.
Hyundai Department Store, for example, has rebranded its locations, renaming its Daegu store as “The Hyundai Daegu” and its Busan store as “Connect Hyundai.” Similarly, Shinsegae has renamed its Gyeonggi store to “Shinsegae South City.”
This shift is accompanied by a growing emphasis on mixed-use developments that combine shopping malls, cinemas, hotels, and entertainment facilities to attract customers.
“Next year, the industry will see intensified polarization between metropolitan and regional markets,” said Kim In-ho, Vice Chairman of Business Insight, predicting a focus on revitalizing or restructuring underperforming outlets.
E-Commerce: A Call for Innovation
Amid retail’s transformation, the e-commerce sector faces its own challenges. Song Ji-yeon, a partner at BCG Korea, stressed the importance of innovation. “Brick-and-mortar retailers must move beyond traditional models to focus on customers, leveraging data and insights rather than conventional metrics like costs and pricing.”
She also underscored the need for personalized customer experiences, storytelling-driven commerce, and new operational models to remain competitive.
As South Korea’s retail landscape evolves, the sector’s ability to adapt to shifting consumer behaviors and economic conditions will define its trajectory in the coming years.
Ashley Song (ashley@koreabizwire.com)
