Duty free shopping in city centers is growing

Sales at city duty-free stores grew a lot faster than those at airports last year.

According to Ministry of Strategy and Finance statistics submitted to the National Assembly Tuesday, duty-free shops in Korea had sales of 8.3 trillion won ($7.48 billion) last year, a 21.6 percent increase over a year earlier.

The sales growth was partly attributed to the opening of three additional duty-free shops last year.

Of 43 duty-free shops nationwide in 2014, 20 were located in airports, 17 stores were in major cities and five were in Jeju Free International City, a semi-free economic zone the central government started to help promote tourism to Jeju. Dongwha Duty Free Shop in central Seoul, meanwhile, is exclusively used by ambassadors to Korea.

Sales at city duty-free shops were 5.4 trillion won last year, 32.2 percent higher than the year before, while sales at airport duty-free shops were 2.5 trillion won, 5.9 percent higher.

In January, the nation’s customs authority decided to permit four more city duty-free shops, three in Seoul and one in Jeju. It was the first time in 15 years that the government opened a bid for city shops.

Local retailers will compete in the bid, which is scheduled for June.

In addition to Lotte and Shilla, the two largest duty-free operators in Korea, Hyundai Department Store and other operators are reportedly considering making bids.

According to the Korea Duty Free Association, Lotte has three city duty-free shops, and Shilla has two. Other operators including Dongwha, Walkerhill (operated by SK Networks) and Shinsegae each run one city shop.

With the new stores, the Korea Customs Service aims to generate 300 billion won in investment from the local retail industry and create new jobs.

Large conglomerates dominate Korean duty-free market, accounting for 88.3 percent of the total duty-free sales last year.

The government legally restricts companies with asset of 5 trillion won or more from commanding more than 60 percent of the number of duty-free shops.

State-run duty-free shops had sales of 567 billion won last year, about 6.8 percent of the market, and small and midsize duty-free operators had sales of 401 billion won last year. The small operators saw their annual sales grow by 58 percent, but they had less than 5 percent market share.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]