As retail rout continues, more duty-free to be unloaded

Industry

Published: 22 Jun. 2020, 17:46 Updated: 22 Jun. 2020, 19:45

As retail rout continues, more duty-free to be unloaded

An advertisement promoting the sale of duty-free goods by Lotte Duty Free. [LOTTE SHOPPING]

With planes grounded and more customers shopping online due to the coronavirus pandemic, retailers are taking desperate measures to keep their businesses afloat.

Lotte Duty Free and The Shilla Duty Free, the top two players by market size, will start unloading unsold duty-free inventory this week, while Lotte Mart is offering employees voluntary unpaid leave for the first time in its two-plus-decade history.

The sales are scheduled in line with the mega summer sales season that runs from June 26 to July 12. Lotte will kick off Tuesday via its online shopping mall, Lotte ON, and expand to eight offline stores on June 26. Shilla plans to open sales on June 25, beginning with the online Shilla Trip.

In April the government gave a special exemption and temporarily allowed duty-free retailers to sell items in inventory for six months or longer into the general market. The exemption was intended to help struggling duty-free stores achieve sales as well as clear leftover inventory, which would be returned or discarded if not sold.

Normally, people buying from duty-free shops have to prove that they are leaving the country and taking the goods with them. The products cannot be sold online to Korean customers.

Lotte Duty Free will be the first to make goods available offline. Around 50 luxury brand items, worth a total 20 billion won, will be sold at discounts of up to 60 percent. The retailer is still undecided on exactly how many goods will be made available. In the case of The Shilla Duty Free, 40 luxury brands will be sold at discounts ranging from 30 to 50 percent, according to a notice on its online shopping site.

“Selling the backlog of inventory would not make a huge difference in our already struggling sales. The purpose is to minimize expenses as much as we can. The special exemption at least lets us take a breather,” a spokesperson from Lotte Duty Free said.

On Monday, Shinsegae Duty Free started its second round of inventory sales, mostly focusing on women’s shoes, offering 280 items from four brands at discounts ranging from 20 to 60 percent. Around 90 percent of the items were sold out in the first five hours on the opening day, the company said.

Shopping carts are parked unused at a discount shop. [NEWS1]

Financially troubled discount chains are making difficult decisions to cut labor costs.

The three big players — Emart, Lotte Mart and Homeplus — suffered during the coronavirus pandemic, as fear of infections stopped customers from coming to stores, while government disaster relief money steered them toward mom-and-pops and traditional markets.

Lotte Mart said Sunday its encouraging voluntary unpaid leave to all its employees, for the first time the discount chain started business in 1998. Employees will be taking unpaid leave for either 20 or 30 days starting next month.

Lotte Mart’s dismal performance scores for the first quarter may have had an effect, as its operating profit plummeted by 74.6 percent on-year. In April, the discount chain decided to cut its executive’s salaries by 20 percent and close around 200 of its 718 offline stores.

Early on, Homeplus, the second-largest player by market size, decided to shave 20 percent of its executive salaries for three months to make ends meet.

“With an accelerating shift to online businesses and increasing deficit, its difficult times for offline discount stores. Currently, we don’t see any positive signal in the market,” said an industry source who wished to stay anonymous.

BY KANG JAE-EUN [kang.jaeeun@joongang.co.kr]