Daigou help to soften cosmetics blow in South Korea DF half-year sales drop

By Luke Barras-hill |

Sales of individual products in duty free and travel retail fell by as much as -80.7% in the first half of 2020, reveals data from Center 4 Duty Free (C4D).

In an analysis of 15 categories tracked between January to June, all posted year-on-year sales declines linked to the crippling effects of the coronavirus (Covid-19) on retail revenues.

Handicraft items (-80.7%) and electronics (-80.7) suffered the sternest blows, followed by watches (-77.8%), sunglasses (-72.5%), jewellery (-71.9%), tobacco (-70.1%) and bags (-69.2%).

While cosmetics still posted a decline (-17.5%), the impact has been softened by sustained demand from Chinese daigou shuttle traders purchasing goods in bulk to resell across the border in Mainland China.

TOBACCO DOWN DESPITE ARRIVALS DF IMPACT 

Sales of cosmetics items totalled KRW5.9 trillion/US$4.9 billion, down from KRW7.1 trillion in the same period last year.

Demand for sought-after beauty goods from Chinese daigou buyers helped arrest a more severe decline in sales compared with other categories. Source: C4D.

“On the other hand, it was inevitable that items that are mainly purchased by Koreans would show a sharp drop in sales,” observed C4D. “With the number of overseas travellers dropping sharply due to Covid-19, domestic sales also seem to have decreased significantly.

“Even though the government has allowed Incheon International Airport to sell tobacco at the arrival duty free shops from May 12 2020, the sales made a sharp decrease of 70.1% from the previous year’s KRW376 billion.”

Downtown duty free sales for the period reached KRW7.3tn, down by 37.1% compared to the same period in 2019 (KRW11,656,8bn).

“Excluding the January sales of KRW1.76 trillion before the Covid-19 outbreak, the sales from February to May were KRW5.67tn, which is virtually half of the previous year,” added C4D. “As the number of tourists decreases, the dependence on Chinese daigou increases in the industry.

As reported, monthly duty free sales in the second quarter dropped by an average of -48.4% year-on-year, although it is worth noting that South Korea’s duty free market has posted consecutive month-on-month sales increases from April to June.

Total visitors to South Korea dropped by 97.5% in June year-on-year, according to the latest statistics from the Korea Tourism Organization.

Chinese arrivals, which accounted for a 13.7% share of total visitors, sank by 98.9% to 5,051 versus 475,007 in the same period last year.

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