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Duty-free sales dropped 19 percent in March

Korean duty-free shops’ sales fell 19 percent in March from a month earlier due to China’s retaliation against Korea’s deployment of a U.S. antimissile system, government data showed Sunday.

Overall sales in domestic duty-free stores fell to 1.06 trillion won ($930 million) in March from the previous month’s 1.305 trillion won, the Korea Customs Service said in a statement.

The decline was sparked by China’s ban on all group travel to Korea from March 15 amid a row between Seoul and Beijing over the ongoing process to deploy the Terminal High Altitude Area Defense (Thaad) system, it said.

China has explicitly opposed installation of the Thaad system since July when Seoul and Washington agreed to install the system in South Korea by 2017 to counter growing nuclear and missile threats from the North. China has argued the powerful X-band radar that comes with the system could be used against it though the allies have reiterated the system is purely defensive.’

The customs office expected local duty-free shops to report worsening sales results in the coming months as China is likely to continue its economic sanctions for the time being.

It will have an impact on the bottom lines of duty-free shops, particularly those in Seoul, as they used to earn 70 to 80 percent of their sales from Chinese travelers, the statement said.

To minimize the impact, duty-free shop operators have asked the government to temporarily raise the upper limit of purchases by Korean travelers at the shops, increase tax benefits for customers and lower their rental payments for shops at Incheon International Airport, it said.

Shinsegae Group and Hyundai Department Store, originally scheduled to start operations by December of this year, said they may consider delaying their opening dates. YONHAP