"At an Exchange Rate of 1,470 KRW, Department Stores Are Cheaper"...Luxury Brands Rush to Exit Downtown Duty-Free Shops [Luxury Price Story]

[The Financial News] As the duty-free sector continues to struggle, luxury brands are closing their operations in downtown duty-free shops. French luxury brand Celine will withdraw from the Lotte Duty Free Myeong-dong Main Store.

According to Maeil Business Newspaper on the 27th, Celine will exit the Lotte Duty Free Myeong-dong Main Store next month.
A representative from Lotte Duty Free stated, "Celine's departure is a result of contract expiration and a subsequent merchandise restructuring. We are currently reviewing which brand will occupy the space."
Celine plans to hold a 30-40% discount event until inventory runs out before closing the store.
The withdrawal of Celine from this location is attributed to the downturn in the duty-free sector.
According to the Korean Statistical Information Service (KOSIS), duty-free retail sales in the third quarter of this year amounted to 3.0068 trillion KRW, marking the lowest quarterly performance since the first quarter of 2020, when the COVID-19 pandemic began.
Cumulative sales from January to September totaled 10.9545 trillion KRW, a 4.8% (557.7 billion KRW) decrease compared to 11.5122 trillion KRW during the same period in 2020.

As duty-free purchases decline, luxury brands have shut down operations at multiple downtown duty-free locations.
French luxury brand Louis Vuitton withdrew from Lotte Duty Free World Tower Branch last September, while Hermès exited The Shilla Duty Free Jeju Branch last year. Italian luxury brand Gucci left both Lotte Duty Free World Tower Branch and The Shilla Duty Free Shop Seoul Main Branch in the same year.
French luxury brand Chanel exited The Shilla Duty Free Jeju Branch earlier, in 2022.
An industry insider told Maeil Business Newspaper, "Since COVID-19, the duty-free industry has faced difficulties, prompting global brands to consider store adjustments or closures. Duty-free shops are reportedly in ongoing negotiations with major brands."

Experts point to the duty-free sector's slow recovery since the COVID-19 pandemic, citing heavy reliance on Chinese customers, changing spending patterns among inbound tourists, and a strong exchange rate that has diminished the price advantage of duty-free goods.
Ryu Yeonju, a researcher at Korea Investors Service (KIS), stated in a report last month, "While the global duty-free market has returned to a growth trajectory after the end of the pandemic, the domestic duty-free sector continues to struggle, failing to recover to pre-pandemic levels."
Ryu explained that the core customer base—Chinese shoppers—now prefers duty-free shops in their own country, weakening the sales foundation of the domestic duty-free industry. Additionally, the slowdown in China's economic growth, partly due to a slumping real estate market, has dampened Chinese consumer sentiment, further impacting the sector.
She added, "The travel preferences of foreign tourists are shifting from group shopping tours to individual, experience-oriented trips. Consumption trends have also moved away from bulk purchases of high-end brands to a focus on practicality and value for money." She noted that these changes in tourist spending patterns are contributing to the sector's downturn.
Other factors hindering the domestic duty-free sector's recovery include intensified internal competition, weakened price competitiveness due to high exchange rates, and the low duty-free allowance for Korean nationals—set at USD 800 (about 1.17 million KRW)—which reduces the incentive to shop.
newssu@fnnews.com Kim Su-yeon Reporter