French luxury house Chanel intends to shutter its downtown duty free points of sale with Lotte Duty Free in Busan and The Shilla Duty Free in Jeju, TRBusiness understands from well-placed industry sources in South Korea.

Lotte and Shilla remain engaged in active dialogue with the brand to reverse its decision to withdraw – due to take place in late March, according to a report in the usually reliable The Korea Herald and carried by other Korean media – in an attempt to avert what would be another hit to the country’s duty free market.

Should the decision materialise, it would remove Chanel’s downtown duty free presence outside of capital Seoul according to The Korea Herald.

“We are still in discussion with Chanel and are doing our best to persuade them,” a source close to the matter told TRBusiness.

TRBusiness has reached out to Chanel for comment.

This latest development emerges after another luxury house Louis Vuitton decided to temporarily close its shop at Lotte Duty Free’s store in Jeju, with the brand planning further downtown closures.

DEPARTMENT STORE LUXURY TAKES ADVANTAGE 

Korea’s duty free market continues to absorb what has been a crippling impact on sales due to the Covid-19 pandemic, which has restricted international travel.

This has left shop revenues heavily reliant on Chinese daigou resellers.

In December, South Korea abolished the departure duty free allowance limit of $5,000, but the $600 cap per person on duty free purchases remains in place.

“Daigous aren’t really buying luxury fashion items – it’s foreign and domestic cosmetics, with sales coming out of those categories,” commented a Korea duty free source. “[But] if foreign travellers come back as the Covid situation eases, there are reasons [why other brands wouldn’t continue to invest in duty free].

“As long as the $600 [allowance cap] stays, there is no reason for shoppers to buy products at domestic duty free shops as they are cheaper in local stores. The [removal of] the $5,000 departure limit doesn’t really help our industry.”