Duty-free sales grow for first time since Feb.

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Duty-free sales grow for first time since Feb.

Duty-free stores posted month-on-month growth in May for the first time since February, thanks to boosted purchases from foreign shoppers, the Korea Duty Free Shops Association said Tuesday. Industry sources, however, caution against the interpretation that this may be the start of a rebound for the domestic duty-free industry.

May sales of domestic duty-free operators were $936 million, a 5.2 percent increase over April. Foreign shoppers contributed to the uplift, which increased consumption by 11 percent to $656 million last month. This is the first time both sales and purchases by foreigners rose month-on-month since February.

In February, monthly duty-free sales reached an all-time high of 1.1 billion won. But the number of foreign visitors and sales declined sharply the following month as the Chinese government banned local agencies from organizing tours to Korea as part of the economic retaliation after the deploy of Thaad.

The restriction dealt a critical blow to the local duty-free industry as Chinese tourists made up 70 percent of sales. Revenue slumped for two months as the number of foreign shoppers fell below 1 million visitors during April for the first time since July 2015, when MERS swept the country.

Despite better sales figures, analysts say that it is too early to assert that this is a definite sign of the local duty-free market recovering from the Thaad crisis.

“One possible explanation is that Korea, Japan and China all have national holidays that month,” said a KDFA spokesman.

“The increase rate would have been much bigger [if not for the Thaad issue]. Before, duty-free sales used to jump an average of 15 percent year-on-year,” added the spokesman. Compared to last year, this year’s May sales increased at half that rate by 7.5 percent. Another source at one of Korea’s major duty-free stores said the company had not seen a drastic change in sales, although there were signs of a slow increase in individual Chinese tourists.

“In early morning, some Chinese tourists wait in front of the stores before opening to grab popular products earlier than others,” said the source. “For some time after the Chinese government’s ban took effect, it was hard to find any Chinese customers at all.”

Another source said a meaningful change in the industry won’t come unless tours from China are fully and officially allowed.

“What could evoke a drastic change at the moment would be the Chinese government announcing to retreat the travel ban and agencies officially relaunching services to Korea” said the source. “But that not being the case, a slight uplift in sales is not enough to promise rosy forecasts for the industry.”

Even if the bans are withdrawn, it would take at least two to three months for group tours to enter Korea, as local agencies need to organize the trips and attract tourists.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]
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