Will a crackdown work?KIM YOUNG-JU
*The author is an industry news reporter at the JoongAng Ilbo.
In the tourism industry, roles are divided. Chinese tour agencies recruit tourists and send them to Korea. When they land here a Korean tour agency takes over to provide local services. You would think that the Chinese agencies that get paid by the tourists would then pay the Korean companies. But the competition is so fierce that the Korean companies actually pay their Chinese partners to ensure they get the customers. The more customers the Chinese tour agency sends, the more the Korean company pays them.
Its a good deal for the tourists as well. The get to buy luxury products in Korea for far cheaper than in China. They especially like Korean beauty products worn by Korean actors. In the end, the duty-free shops sell products to the tourists and the Korean tour operators take a cut of the profit for bringing the customers. The duty-free company makes money, the Korean tour operator makes money and the Chinese tourists are satisfied.
But the Chinese tourists are clever. They take advantage of freebies and coupons to load up on as many Korean products as they can carry, and then fly back to China and sell them for a profit. It used to just be merchants that would buy duty-free products to sell back home, but now many Chinese visitors have jumped on the bandwagon.
Anyone with a WeChat account can sell products online. The Korean companies had to work very hard to bring the Chinese tourists to Korea, but the tourists are the ones that are really benefitting from the arrangement.
Duty-free shops and tour agencies complain that they are losing profit because of commissions and fees. Korean cosmetics companies are also suffering. Who would pay higher prices and shop at department stores when Korean products are available on WeChat for less?
On a JoongAng Ilbo report that Chinese tourism is increasing, readers commented that it is disheartening. The Ministry of Culture, Sports and Tourism announced on May 15 that companies that sell low-quality, low-priced products will be investigated. The government will designate which tour operators can handle Chinese group tours and subpar companies will be weeded out.
The tourism industry is responding with various tricks. Subpar companies can merge or acquire a company with government approval. Some companies register multiple entities in case one is thrown out. Officials surely know these tricks. The authorities obviously know the real problems, but have done nothing but declare “stern actions” again.
JoongAng Ilbo, May 16, Page 29