, Chinese tourism recovery and eased offshore losses drive strong sales and profit gains for The Shilla Duty Free, WorldNews | Travel Wire News

Chinese tourism recovery and eased offshore losses drive strong sales and profit gains for The Shilla Duty Free

SOUTH KOREA. The Shilla Duty Free posted a +680% year-on-year increase in its Q2 consolidated (Korean and offshore) travel retail operating profit to KW64 billion (US$57.3 million). Revenue rose +53% to KW1,054.9 billion (US$943.8 million). The company’s Korean travel retail business saw profit and revenue gains of +46% and +306% respectively.

Improved performance at Singapore Changi Airport eased losses there and boosted overall profitability. While the international business still posted a loss of KW6.2 billion (US$55.5 million) for the quarter, that was a sharp improvement on the KW9.1 billion (US$81.4 million) last time.

Revenue in downtown and airport stores increased by +54% and +51% respectively, Shilla said.

Shilla has been buoyed by the sharp recovery in Chinese tourism to South Korea (see latest tables below) as the THAAD dispute has eased.

The company said that Q3 is the peak period for Korean customers. After the summer, Shilla expects increasing demand due to the busy Chinese mid-Autumn Festival.

The company also expects revenue improvement at Hong Kong Airport store after the Grand Opening of its Beauty&You cosmetics, fragrances and fashion accessories concession on 28 June.

Click on the image to view the exclusive Moodie Davitt e-Zine report on The Shilla Duty Free’s recent Grand Opening of Beauty&You at Hong Kong International Airport.


Shilla’s results come amid a resurgent market South Korean travel retail market. As revealed by The Moodie Davitt Report, Korean duty free sales  rose by +38% year-on-year in the first half to KW9.1994 trillion (US$8.1 billion), according to Korea Customs Service.

The figures were driven by a sharp bounce back in Chinese tourism in recent months. As reported, Chinese visitor arrivals to South Korea rose +49% year-on-year in June to 379,891, continuing the robust recovery from the 2017 THAAD crisis, according to Korea Tourism Organization (KTO).

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While still a long way off the pre-THAAD June 2016 record of 758,534, those results continue an encouraging pattern expressed in a +60.9% increase in April and a +46.1% rise in May. Chinese tourism slumped drastically after the 17 March, 2017 crackdown on group tours to South Korea.

The first-half duty free sales figure was made up as follows:

  • KW7.47 trillion (US$6.6 billion) by foreigners (KW0.64 million from each customer) and KW1.73 trillion (US$1.5 billion) by Koreans (KW0.14 million from each customer)
  • Sales hit KW1.6017 trillion (US$1.4 billion) in June, a leap of +46.7% compared to 2017 June, with sales from foreigners climbing by +61.9% and by +13.6% among Koreans

A snapshot of recent growth in Korean duty free: the purple line denotes sales by foreigners, the light purple line sales by Koreans (left axis). The red line highlights the number of foreigners purchasing, the yellow the number of Koreans purchasing (right axis). Source: (Korea Customs Service)

The huge increase in sales is also being driven by the daigou (shuttle trader) phenomenon. The trade involves hundreds of thousands of Chinese shoppers purchasing Korean and international duty free goods for customers in Mainland China at well below prevailing Chinese domestic prices and then reselling them.

Daigou driver: The shuttle trade between South Korea and China continues to be a major influence on Korean duty free sales growth

Korean duty free sales hit KW14.4684 trillion (US$12.8 billion converted at today’s rate) in 2017, but are forecast to soar by over +25% to KW18.4 trillion (US$16.3 billion) in 2018.

However it’s not all good news, according to one seasoned Korean travel retail executive. “Actually the June sales amount was down from May by a single-digit percentage which means the market’s over-dependency on the Chinese indirect business (daigou shoppers) is being saturated,” he said. “The recent weakening Yuan and toughened China Customs’ control over such shuttle traders are gradually eroding KDF competitiveness. And three more Seoul downtown store openings this year means competition becomes more expensive and the market moves to saturation point at a higher speed.”

Chinese tourism for the first half (above) was down marginally on a troubled 2017 but as the June table below shows, the recovery is now in full flow. Japanese visitor arrivals meanwhile continue to surge. [Tables: Korea Tourism Organization]