The domestic duty-free market went past the THAAD chill to ‘icy cold.’ The total sales of all duty-free shops in the country decreased 18.27% from $1,140,247,256 in February to $931,945,302 in March. It is a contrast to the 17.20% increase in the same period last year. In particular, the downtown duty-free shops in Seoul saw their sales decline by 25.32% from February, and the downtown duty-free shops in Jeju witnessed their sales fall by 40.01%, keenly realizing the THAAD chill.

The sales of each store of No. 1 duty-free shop operator, Lotte Duty-free Shop, dropped by maximum 58.66% in March from the previous month. The monthly sales of Lotte Duty-free Shop in COEX amounted to $30,698,105 in the previous month, but the figure slid to $12,691,141 in March, the worst drop in all downtown duty-free shops. The sales of the main store of Lotte Duty-free Shop decreased by 29.90%, the World Tower store 29,21%, the Jeju store 51.23%, and the Busan store 5.05%. All of them experienced a huge decline of sales. China is imposing economic sanctions on ‘Lotte’ because it provided the Ministry of National Defense with the land for the THAAD site (Seongju Golf Course), and ‘prohibiting Chinese tourist from visiting Korea.’ All these measures are dealing a hard blow to domestic duty-free shop operators.

Following Lotte, Shilla and Shinsegae duty-free shops are also influenced by the THAAD retaliation. The sales of Shilla Duty-free Shop in Seoul amounted to $152,351,485 in March, down 11.59% from the previous month, and the March sales of Shinsegae Duty-free shop in Myeong-dong was $82,940,382, down 11.23% from the previous month. About this, a duty-free shop insider said, “Consumers drained from Lotte Duty-free Shop went to other duty-free shops in the vicinities. But as China ‘ordered its citizens not to visit Korea,’ the sales of all duty-free shops declined.”

The duty-free shops in the departure area of the Incheon International Airport experienced the drop in March sales somewhat later than downtown duty-free shop. Those Chinese tourists who visited Korea before March 15 when the ban on visits to Korea went into effect shopped at these stores as they left the country, but as the total number of Chinese tourists visiting Korea decreased, the sales of the airport duty-free shop was also affected.

Due to the ‘ban on visits to Korea’ imposed on Chinese tourists in March, some argued, they purchased large quantities of duty-free goods before March 15, further increasing the March drop in sales from the previous month. According to Korea Duty Free Shops Association, the total sales of duty-free shops in Korea amounted to about $701.943 million last February, and increased by 62.4% YoY this February to $1,140.247 million.

New duty-free shops and small and medium-sized duty-free shops could not avoid the ‘THAAD Cold Wave.’ Shilla iPark Duty-free Shop saw its sales decrease by about 10.43% in March from the previous month, Galleria Duty-free Shop 63 by 7.67%, and Doota Duty-free Shop by 11.76%. Dongwha Duty-free Shop witnessed its sales fall by 12.58%. The chill from the THADD retaliation and the drain of luxury brands is intensifying. The sales of SM Duty-free Shop went down by 12.19%. However, the sales of SM Duty-free Shop at the Incheon International Airport increased by 1.56% in March from the previous month, drawing public attention.

The number of Chinese tourists in Jeju noticeably declined, and the tax refund shops in the Bao Zhen Street are on the verge of shutdown. Lotte, Shilla and JTO (Jeju Tourism Organization) are operating downtown duty-free shops in Jeju, and their sales went down by 51.23%, 29.67% and 35.15% respectively in March from February. Galleria Duty-free Shop in the departure area of the Jeju International Airport, saw its sales decrease by 40.7% in March from the previous month, and by 54.92% YoY, facing a crisis.

Meanwhile, a number of duty-free shop insiders said, “The number of Chinese tourists dwindled, and to overcome the crisis, we are doing everything we can to attract Japanese and Southeast Asian tourists. We are also conducting marketing programs for locals to boost spending. As the domestic duty-free market is facing a crisis due to the economic retaliation of China, we are expecting the government to come up with effective countermeasures.”

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