South Korea Bounces Back for Chinese Luxury Shoppers

Lotte's duty-free department store in Seoul is incredibly popular with Chinese shoppers. (Shutterstock)

Lotte’s duty-free department store in Seoul is incredibly popular with Chinese shoppers. (Shutterstock)

As Hong Kong continues to struggle to bring back visitors from mainland China, South Korea’s MERS-led slump appears to be over as Chinese tourists flood back in.

Recent statistics reported that the number of Chinese tourist arrivals to South Korea was 650,174 for October, marking a 15.6 percent year-on-year increase—the first time growth has reached double digits since the start of the MERS outbreak in May.

The fear of MERS in South Korea and the antagonism of anti-mainland protestors in Hong Kong meant that a massive number of Chinese travelers opted to head to nearby Japan over the past several months, making Japan a top source of growth globally for many luxury brands including Hermès and Burberry.

But Japan is likely to be sharing more of those profits with South Korea in the future. Prior to the MERS outbreak, Japan and South Korea were both seeing some of the strongest growth rates for Chinese tourist numbers. For the first half of 2015—before the MERS crisis kicked in—Japan was the third most popular outbound market for Chinese tourists after South Korea and Taiwan.

The availability of duty-free shopping in both South Korea and Japan has been a major draw for Chinese shoppers, and South Korea’s duty-free retail market has seen a rebound to coincide with its Chinese traveler growth. The Korea Duty-Free Association reported that sales rose 5.7 percent in October, and competition is heating up between the country’s duty-free giants to reach Chinese consumers. According to Nikkei, Shinsegae and Lotte have been engaged in a battle to open up shop in prime retail locations frequented by Chinese travelers. Shinsegae was recently awarded the rights to open a duty-free shop in Seoul’s Myeongdong district, which is extremely popular with Chinese tourists. The store will be competing directly with Lotte, which also runs a duty-free shop in the area.

Although South Korea doesn’t face tough competition with Hong Kong for now, it will have to contend with Japan to attract Chinese tourist spending as it continues to focus on its comeback. Despite the fact that Chinese tourists were boycotting Japan not long ago over the Senkaku Islands dispute, a weak yen has meant that low prices of luxury items and high-tech appliances trumps nationalism. Nonetheless, Chinese consumers’ love for Korean culture and easy access from China means that both will likely be seeing big benefits from massive Chinese demand in the near future.

 

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