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Korea Duty Free Market: Analysis By Product Category, By Nationality, By Sales Channel, Size and Trends with Impact of COVID-19 and Forecast up to 2029

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    Report

  • 89 Pages
  • March 2024
  • Region: South Korea
  • Daedal Research
  • ID: 5947295
Duty-free refers to the ability to purchase items without paying customs duties or other taxes like import, sales, value-added, or consumption taxes. Duty-free shops, commonly found in airports and on ships, offer goods that are free from government taxes, making them potentially more affordable for consumers. One of the primary objectives driving the growth of duty-free sales is the cost savings for consumers. The duty-free market in Korea is a significant sector within the country's retail industry, catering to both domestic consumers and international travelers. The Korean duty-free market showcases unique competitiveness by offering a wide range of domestic and global brands, including 'K-beauty' products and Korea's distinct culture. Korea duty free market value in 2023 stood at US$ 18.43 billion, and is likely to reach US$ 26.13 billion by 2029.

One of the prominent factors driving the rise in Korea duty free market demand include increase in international travel and tourism. The steady growth of the duty-free retailing market in recent years has been primarily driven by an increase in international travel and tourism, attracting visitors from countries like China, Japan, and Southeast Asia to Korea for its vibrant culture, tourist attractions, and duty-free shopping opportunities. Additionally, competitive pricing strategies and tax-free benefits have also made duty-free shopping an attractive proposition for travelers, further boosting sales in the Korea duty-free market. Furthermore, the Korea duty free market is predicted to grow due to continued emphasis on digital transformation, personalization and data analytics, sustainability, rise of social media and growing awareness about K-beauty and food products etc. The Korea duty free market value is projected to grow at a CAGR of 5.21%, during the forecast period of 2024-2029.

Market Segmentation Analysis:

By Product Category: According to the report, the Korea duty free market is bifurcated into six segments based on the product category: cosmetics, perfumes, leather goods, fashion accessories, alcohol and others etc. Cosmetics acquired majority of share in the market in 2023 due to rising popularity of K-beauty, and diverse product offerings. Moreover, tourists, particularly from China, Japan, and Southeast Asia, are drawn to Korea for its vibrant culture and beauty trends. The appeal of Korean cosmetics, known for their high quality and effectiveness, drives tourists to purchase these products in duty-free shops, boosting the demand for cosmetics in the market. While, alcohol segment is the fastest growing segment because of Korea's deep-rooted cultural appreciation for alcohol, including traditional liquors like Soju and a growing interest in Western spirits. Additionally, the allure of premium and luxury alcohol brands attracts consumers seeking exclusivity and quality. Government initiatives, such as increased duty-free allowances and streamlined visa processes, further bolster duty-free shopping, including alcohol purchases.

By Nationality: According to the report, the Korea duty free market is bifurcated into three nationalities: Chinese buyers, domestic buyers and foreigner buyers. Chinese buyers acquired majority of share in the market in 2023, as China is geographically close to Korea and has a large population of affluent travelers who frequently visit duty-free shops. Secondly, Korean beauty and fashion products are highly coveted among Chinese consumers due to their perceived quality and trendiness. This demand drives Chinese tourists to purchase these goods in bulk at duty-free stores, taking advantage of tax-free prices. Furthermore, favorable government policies, such as visa relaxations and increased duty-free allowances for Chinese tourists, encourage travel and shopping in Korea.

By Sales Channels: According to the report, the Korea duty free market is bifurcated into two sales channels: downtown and others. Downtown segment acquired majority of share in the market in 2023 due to their prime locations in high-traffic urban areas like Myeongdong, offering convenience to both local and international shoppers. They boast a diverse range of products, including luxury brands and cosmetics, appealing to a broad customer base. Leveraging effective marketing strategies and the allure of tax-free prices, downtown stores attract and retain customers, solidifying their dominance in the Korea duty-free market.

By Region: The report provides insight into the Korea duty free market based on the geographical operations, namely Seoul, Incheon, Jeju, Busan and others. Seoul duty free market enjoyed the highest market share in 2023 as Seoul is the capital city and the largest metropolitan area in Korea, that attracts a significant portion of both domestic and international tourists. The city's status as a cultural and economic hub enhances its appeal to tourists, further driving the demand for duty-free goods.

Korea Duty Free Market Dynamics:

Growth Drivers: The growing Daigou market serves as a significant growth driver for the Korea duty-free market, primarily due to its impact on sales volume and revenue generation. Daigou, particularly large-sized ones, play a crucial role in driving sales by purchasing goods in bulk from duty-free shops and reselling them to Chinese consumers. Sales per customer are typically highest for large-sized Daigou, indicating their significant contribution to duty-free revenue. Duty-free operators incentivize Daigou purchases by offering commissions, including discounts and reward points, to travel agencies and customers who generate high sales volumes. Duty-free stores increasingly rely on Daigou to manage their inventory and boost sales, highlighting the pivotal role of the Daigou market in driving market growth. Other significant growth drivers driving the market growth include rising disposable income, broader product selection, capturing Chinese demand, government support, etc.

Challenges: Regulatory changes pose significant challenges to the Korea duty-free market, impacting various aspects of operations and profitability. Changes in government regulations related to duty-free shopping, import/export policies, and tax regimes can disrupt the supply chain, affecting product availability, procurement costs, and ultimately, consumer satisfaction. Additionally, changes in licensing regulations or permit conditions may restrict retailers' ability to operate in certain locations or sell specific product categories, posing further challenges to business operations and revenue streams. Other challenges may include currency fluctuations, etc.

Trends: Metaverse integration is rapidly emerging as a transformative trend in the Korea duty-free market. Duty-free retailers are harnessing virtual reality (VR) and augmented reality (AR) technologies to revolutionize the shopping experience. By creating immersive virtual stores and environments, retailers offer customers the opportunity to explore product offerings, interact with virtual representations of products, and make purchases - all without leaving the comfort of their homes. More trends are believed to augment the growth of Korea duty free market during the forecasted period include, targeting emerging market segments, focus on sustainability, partnerships and collaborations, digital transformation, etc.

Impact Analysis of COVID-19 and Way Forward:

The COVID-19 pandemic has had negative impact on the Korea duty free market, leading to temporary closures, reduced foot traffic, and shifts in demand. Duty free stores experienced a sharp decline in sales in 2020 due to a fall in tourists. Luxury goods were the most popular categories, but the pandemic led to increased duty-free inventories, causing losses for many duty-free stores.

Duty-free sales in Korea have seen a rise in overall travel, indicating potential growth post-COVID. The industry has seen a significant increase in commission payments from travel agencies and guides, with travel agency commissions increasing from 30% in 2019 to almost 40% after the pandemic. China's duty-free sector is projected to experience significant growth directly impacting the Korea duty-free market. International travelers are increasingly open to e-commerce and focusing on zero-waste production and sustainable consumption practices, which could enhance the Korea duty-free market post-COVID.

Competitive Landscape and Recent Developments:

Korea duty free market is a competitive and concentrated industry with the top five players controlling almost 90% of the overall market. This diverse landscape leads to a dynamic market environment that addresses the growing demand for duty free products. Key players of Korea duty free market are:
  • Shinsegae
  • Hotel Shilla
  • Hyundai Department Store
  • Lotte Corporation (Lotte Duty Free)
  • DongHwa Duty Free
  • City Duty Free
  • Kyung bok kung Duty Free
  • FANFAN Duty Free
  • Shilla IPark Duty Free Store (HDC Shilla)
The key players are constantly investing in strategic initiatives, such as adoption of new technologies, introducing their services to emerging markets and more, to maintain a competitive edge in this market. For instance, in March 2023, Hyundai Department store duty-free announced that it had signed a memorandum of understanding (MOU) with OlimPlanet for the metaverse platform business and in the same month Lotte Duty Free signed an agreement with Seoul Metropolitan Government to boost Korean beauty and fashion brands. Also, in December 2023, Shinsegae Duty Free formed strategic alliance with Cathay Pacific to drive passenger spend.

Table of Contents

1. Executive Summary
2. Introduction
2.1 Duty Free: An Overview
2.1.1 Introduction to Duty Free
2.1.2 Key Features or Benefits Specific To Each Sector
2.2 Duty Free Segmentation: An Overview
2.2.1 Duty Free Segmentation
3. Korea Market Analysis
3.1 Korea Duty Free Market: An Analysis
3.1.1 Korea Duty Free Market: An Overview
3.1.2 Korea Duty Free Market by Value
3.1.3 Korea Duty Free Market by Product Category (Cosmetics, Perfumes, Leather Goods, Fashion Accessories, Alcohol And Others)
3.1.4 Korea Duty Free Market by Nationality (Chinese, Domestic and Others)
3.1.5 Korea Duty Free Market by Sales Channel (Downtown and Others)
3.1.6 Korea Duty Free Market by Region (Seoul, Incheon, Busan, Jeju and others)
3.2 Korea Duty Free Market: Product Category Analysis
3.2.1 Korea Duty Free Market: Product Category Overview
3.2.2 Korea Cosmetics Duty Free Market by Value
3.2.3 Korea Perfume Duty Free Market by Value
3.2.4 Korea Leather Goods/Apparel Duty Free Market by Value
3.2.5 Korea Fashion Accessories Duty Free Market by Value
3.2.6 Korea Alcohol Duty Free Market by Value
3.2.7 Korea Others Duty Free Market by Value
3.3 Korea Duty Free Market: Nationality Analysis
3.3.1 Korea Duty Free Market: An Overview
3.3.2 Chinese Buyers of Korea Duty Free Market by Value
3.3.3 Domestic Buyers of Korea Duty Free Market by Value
3.3.4 Other Foreigner Buyers of Korea Duty Free Market by Value
3.4 Korea Duty Free Market: Sales Channel Analysis
3.4.1 Korea Duty Free Market: Sales Channel Overview
3.4.2 Korea Downtown Duty-Free Market by Value
3.4.3 Korea Others Duty Free Market by Value
4. Impact of COVID-19
4.1 Impact of COVID-19 on Korea Duty Free Market
4.1.1 Declining Foreign Tourists Visiting Korea
4.2 Post Impact of COVID-19 on Korea Duty Free Market
5. Market Dynamics
5.1 Growth Drivers
5.1.1 Growing Daigou Market
5.1.2 Rising Disposable Income
5.1.3 Broader Product Selection, Especially in Beauty
5.1.4 Capturing Chinese Demand
5.1.5 Government Support
5.1.5 Rising Demand for Luxury Goods
5.2 Challenges
5.2.1 Regulatory Changes
5.2.2 Currency Fluctuations
5.3 Market Trends
5.3.1 Digital Transformation
5.3.2 Partnerships and Collaborations
5.3.3 Focus on Sustainability
5.3.4 Emerging Market Segments
5.3.5 Metaverse Integration
6. Competitive Landscape
6.1 Korea Duty Free Players by Market Share
6.2 Korea Duty Free Market Players: Numbers of Duty-Free Stores
6.3 Korea Duty Free Market Players: Number of Duty-Free Stores in Incheon Airport
6.4 Korea Duty Free Market Players: Major Events
7. Company Profiles
7.1 Lotte Corporation (Lotte Duty Free)
7.1.1 Business Overview
7.1.2 Operating Segments
7.1.3 Business Strategy
7.2 Hotel Shilla Co. Ltd. (The Shilla Duty Free)
7.2.1 Business Overview
7.2.2 Operating Segments
7.2.3 Business Strategy
7.3 Hyundai Department Store Group (Hyundai Department Store Duty Free)
7.3.1 Business Overview
7.3.2 Business Strategy
7.4 Shinsegae Co., Ltd.
7.4.1 Business Overview
7.4.2 Business Strategy
7.5 City Duty Free Store
7.5.1 Business Overview
7.5.2 Business Strategy
7.6 Dongwha Duty Free Shop Co. Ltd.
7.6.1 Business Overview
7.7 Kyung Bok Kung Duty Free Co., Ltd
7.7.1 Business Overview
7.8 FanFan Duty Free
7.8.1 Business Overview
7.9 SHILLA IPARK (HDC Shilla)
7 .9.1 Business Overview
List of Figures
Figure 1: Key Features or Benefits Specific To Each Sector
Figure 2: Duty Free Segmentation
Figure 3: Korea Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 4: Korea Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 5: Korea Duty Free Market by Product Category; 2023 (Percentage, %)
Figure 6: Korea Duty Free Market by Nationality; 2023 (Percentage, %)
Figure 7: Korea Duty Free Market by Sales Channel; 2023 (Percentage, %)
Figure 8: Korea Duty Free Market by Region; 2023 (Percentage, %)
Figure 9: Korea Cosmetics Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 10: Korea Cosmetics Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 11: Korea Perfume Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 12: Korea Perfume Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 13: Korea Leather Goods/Apparel Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 14: Korea Leather Goods/Apparel Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 15: Korea Fashion Accessories Duty Free Market by Value; 2019-2023 (US$ Million)
Figure 16: Korea Fashion Accessories Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 17: Korea Alcohol Duty Free Market by Value; 2019-2023 (US$ Million)
Figure 18: Korea Alcohol Duty Free Market by Value; 2024-2029 (US$ Billion)
Figure 19: Korea Others Duty Free Market by Value; 2019-2023 (US$ Million)
Figure 20: Korea Others Duty Free Market by Value; 2024-2029 (US$ Million)
Figure 21: Chinese Buyers of Korea Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 22: Domestic Buyers of Korea Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 23: Other Foreigner Buyers of Korea Duty Free Market by Value; 2019-2023 (US$ Million)
Figure 24: Korea Downtown Duty-Free Market by Value; 2019-2023 (US$ Billion)
Figure 25: Korea Others Duty Free Market by Value; 2019-2023 (US$ Billion)
Figure 26: Korea Total International Arrivals; 2018-2022 (Million)
Figure 27: Korean Duty-free Stores' Daigou Sales and Commissions Paid (US$ Billion)
Figure 28: Household Disposable Income by Region; 2018-2022 (US$ per capita)
Figure 29: Korea Duty Free Players by Market Share; 2023 (Percentage, %)
Figure 30: Lotte Corporation Revenue by Segment; 2023 (Percentage, %)
Figure 31: Hotel Shilla Co. Ltd. Revenue by Segment; 2023 (Percentage, %)
List of Tables
Table 1: Korea Duty Free Market Players: Numbers of Duty-Free Stores
Table 2: Korea Duty Free Market Players: Number of Duty-Free Stores in Incheon Airport

Companies Mentioned

  • Shinsegae
  • Hotel Shilla
  • Hyundai Department Store
  • Lotte Corporation (Lotte Duty Free)
  • DongHwa Duty Free
  • City Duty Free
  • Kyung bok kung Duty Free
  • FANFAN Duty Free
  • Shilla IPark Duty Free Store (HDC Shilla)