Duty-free shops open cross-border sales to secure overseas consumers

South Korea’s duty-free shops are launching cross-border sales services starting Friday with high hopes to secure consumers overseas, as they are losing price advantage to local clients due to high won-dollar exchange rates.

Lotte Duty Free opened the overseas shipping service on Wednesday, which sells around 220 kinds of products including cosmetics, fashion items and food products. Consumers in nine countries including China, Japan, US, Singapore and Thailand can enjoy free shipping as long as they buy over $70 worth of items.

“Despite the transition to an endemic phase of the COVID-19 pandemic, won-dollar exchange rates are going through the roof. Facing the challenge of losing our domestic consumer base, we are looking into ways to appeal to a larger pool of international customers,” said a Lotte Duty Free official.

Shilla Duty Free aims to take back Chinese consumers, who frequented the company’s stores with deep pockets before the COVID-19 pandemic hit. The company on Tuesday forged a partnership with Cainiao, the logistics unit of Chinese e-commerce giant Alibaba, which offers an end-to-end logistics service including domestic and international shipping, inventory and customs management.

With Cainiao, Shilla Duty Free is poised to launch an online duty-free shopping service for Chinese consumers at its Chinese website. It plans to sell more than 300 items ranging from cosmetics to health food products.

According to a report from iiMedia Research, a Chinese data-mining firm, the number of consumers who enjoy cross-border online shopping is around 15.8 billion as of 2020. Driven by the large Chinese population, a high level of consumer purchasing power and high demand for imported items, the number is expected to increase in the following years as well, the report showed.

Shinsegae Duty Free and Hyundai Department Store Duty Free are also in talks with local and international brands, logistics companies and other partners to open cross-border shopping platforms, in July and within this year, respectively.

The Korea Customs Service has begun setting up guidelines for cross-border sales of duty-free shops since March, and has allowed local shops to launch such services starting next month.

The closing price of the won-dollar exchange rate exceeded 1,300 won for the first time in 13 years on June 23. The local currency rose against the US dollar by 15.4 won to 1299 won at the closing bell on Wednesday.

By Byun Hye-jin (hyejin2@heraldcorp.com)