Chanel is set to exit its downtown duty-free businesses in Seoul by the end of next month. The news was reported by Business of Fashion.
Chanel is the latest in a group of luxury brands to pull out of Seoul’s downtown duty-free stores, followed by Louis Vuitton. Both brands are expected to completely pull out of the downtown stores by March 2023. Rolex has also closed seven of its downtown stores last year, leaving only three trading at Seoul, Jeju, and Incheon airports.
Luxury brands are pulling out of the duty-free markets there because of the decline of China’s daigou trade, where surrogate shoppers bought lower-priced offshore products and resold them in China. The practice was standard until COVID-19 brought this to a virtual halt. Daigou shoppers were 90 percent of Korea’s duty-free sales.
China and South Korea are the world’s top two largest duty-free markets, with sales valued at 7 billion dollars. China recently surpassed Korea as the world’s largest duty-free market in 2020. China is still expected to see growth in its duty-free sector, with CAGR of 17.4 percent expected between 2019 and 2025.
Despite pulling out of South Korea, Louis Vuitton will open six duty-free stores in mainland China next year, along with an outlet at the Hong Kong International airport. Korea is hoping tourism rebounds soon, or its duty-free sector is expected to suffer further.