South Korea is the world’s largest duty-free market, and in 2017, the country’s duty-free sales reached an all-time high of US$11.7 billion, according to data and analytics company GlobalData.
The company’s latest report, Global Duty Free Retailing 2017–2022, reveals that despite the Terminal High Area Defense (THAAD) missile row between South Korea and China, which led to a halving of the number of Chinese visitors to the country, duty free sales in South Korea increased by US$2.2 billion in 2017, up from US$9.5 billion in 2016, a 23.1% annual growth rate.
Maureen Hinton, retail research director at GlobalData, comments, ‘‘The deployment of the THAAD missile system in South Korea and the consequent ban on Chinese travelers visiting the country was potentially very significant. As the Chinese are the big spenders and a key driver of the market, a decline in sales should have been the outcome.’’
Yet South Korea retains its position as the leading global market, with a 22.1% share of the US$52.9 billion duty-free market—thanks to the ingenuity of the daigou (shuttle trade). These traders bought large quantities of duty-free product from downtown duty-free locations and sold them on in China, where the demand for luxury and premium brands at reduced prices continues. And of course, the country had another boost with the global spotlight on it for the Winter Olympics.
Hinton continues, “South Korea is now a global destination for its beauty brands and innovation, and it is also becoming a fashion destination as well.’’
The country attracts tourists and business travelers globally, not just from other APAC countries, and Incheon Airport, which caters so well to travelers and retailers, was recognized as the leading duty-free airport in 2017.”
Hinton adds, “GlobalData forecasts that by 2022, South Korea will account for nearly a quarter of all duty-free spending at 24.1% of the global market. However, optimism about a new settled relationship with North Korea could drive its sales even higher if the border opens.”