Duty-free stores want to sell products locally as travel plummets

A group of duty-free retail companies this week asked the government to allow them to temporarily sell their backlog of wares in department stores and other retail outlets as business at duty-free stores has sharply declined in the wake of the coronavirus pandemic, Lotte Duty Free said Friday.

Duty-free operators including Lotte, Shilla, Shinsegae and Hyundai have requested the Korea Customs Service temporarily suspend a sales regulation that bars duty-free items from being distributed in the domestic market. The regulation also stipulates that stock that haven’t been sold must be discarded.

“Expanding the sales routes to department stores and outlets will help duty-free operators handle stock,” said Do Young-kwang, a Shinsegae Duty Free spokesperson. “There needs to be people to generate sales, but there are hardly any travelers. Seventy to 90 percent of duty-free sales have been lost, so naturally, our stock has piled up.”

Duty-free sales in February fell to 1.1 trillion won ($905 million), a 45.5 percent drop compared with January’s sales, according to the Korea Duty Free Shops Association.

The duty-free industry is asking the government to let retailers sell goods that have been in storage for more than three years to locals after passing the customs clearance. Because food and cosmetics are subject to expiration dates, the products that would be available in the local market would likely be limited to fashion and general merchandise, such as watches.

The stores operate through direct buying, in which they purchase in bulk and store the overstock. Orders need to be placed at least three months prior to sales.

The duty-free industry is also asking the government to allow foreign tourists to send duty-free items back home via international packages. They hope this approach will spur more consumption by relieving tourists of the need to carry around the purchased items while they’re in Korea.

“The situation is serious,” said Park Seok-in, a spokesperson for Lotte Duty Free. “We usually keep our stock at a distribution center in Incheon but have temporarily borrowed a separate distribution center in Yeongjong Island [on the west coast of Incheon] for storage.”

Last month, Incheon International Airport Corporation initiated the first stage of its emergency measures, which include cutting back operations of its immigration desks, check-in counters and baggage-handling facilities.

The first of the three-stage emergency plan kicks off when daily passenger levels fall to between 7,000 and 12,000. The number of passengers dipped to the 3,000 range in April, but the airport corporation hasn’t yet initiated the second stage.

BY JIN MIN-JI [jin.minji@joongang.co.kr]