South Korea’s duty free and travel retail industry is set to become a key focus for the sector’s operators according to a new report.

The report, from duty free and travel retail analyst Counter Intelligence Retail (CiR), indicates that while the industry in South Korea may still be reeling from last year’s Chinese government ban on group travel to South Korea, it has put renewed focus on South Korean shoppers.

Titled The South Korean Traveller , the report analyses passenger shopping and buyer behaviour, indicating that South Korea is now the seventh biggest spender on tourism in the world at US$27bn. And, more crucially to retailers, international growth is set to rise dramatically.

CiR estimates that outbound South Korean traffic could grow by as much as 80% or more by 2027 at a compound annual growth rate of almost 7% per year. This increase would represent an absolute growth of over 17.5 million departures on 2017 as South Koreans continue to be a key volume driver across Asia Pacific and globally.

South Korea is heavily reliant on Chinese tourists, who accounted for nearly half of all international arrivals in 2016, but the market is also exposed to indigenous South Korean outbound travellers, in both downtown duty free and travel retail stores and at airports.

The South Korean retail landscape for airport departures is distinctive in that at Incheon airport – which accounts for almost four out of five South Korean international departures – there are several competing operators, including regional powerhouses such as Lotte and The Shilla, Shinsegae and Entas, as well as smaller enterprises.

Lotte currently holds the lion’s share of outbound PAX exposure, according to CiR data, and, while it has recently terminated its contracts for perfume and cosmetics, leather goods and fashion at Incheon T1 – following rent increases and plummeting Chinese passenger numbers – the retailer kept its main liquor and tobacco licence.

The world’s largest travel retail operator, Dufry, also has a stake in the Korean travel retail market, with a subsidiary of the company capturing a duty free concession at Gimhae International Airport in Busan in 2013.

Garry Stasiulevicuis, President of CiR, said: “As South Korean operators take more notice of indigenous travellers, so too should DF&TR operators in other markets when South Koreans are travelling.”

Source

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