As Chinese tourists continue to splurge, South Korea's retailers scramble for duty-free licences

By Michelle Yeomans

- Last updated on GMT

As Chinese tourists continue to splurge, South Korea's retailers scramble for duty-free licences

Related tags South korea

As business continues to boom in South Korea thanks to Chinese tourists, retailers are scrambling to open duty-free shops in Seoul to get a piece of the action.

According to statistics from the South Korean financial investment and tourism information system, as many as 574,000 Chinese visitors were reported to have made the trip to close neighbour Korea in 2014, which makes up 45% of all foreign tourists.

A preference for Korean cosmetics was not limited to incoming tourists though, exports to China also accounted for 54.7% of total Korean beauty exports.

In fact, Chinese tourists voted South Korea the 'best shopping city' in a 2014 International poll.

According to the Financial Times, for the first time in fifteen years, authorities have plans to issue two new licences to major retailers which has seen various groups and conglomerates vying for the opportunity.

However, the publication notes that "it will be difficult for duty-free shops to maintain such high margins as competition intensifies, with the increasing number of domestic players, and the weaker yen luring Chinese tourists to Japan."

Female tourists from China are fueling sales for South Korea

Figures released by website, Huanqiu revealed female tourists from China to be fueling sales for South Korean cosmetics brands.

One area expected to be pushed particularly hard ​by the South Korean representatives is the country’s cosmetics sector​ as under current trading regulations with China, South Korean beauty products are hit with a tariff as high as 130%, putting them very much in the luxury and prestige end of the retail spectrum.

If lobbying is successful, as part of the free trade pact, Japanese players such as Amore Pacific, The Face Shop and LG Household & Health Care, will be looking to ensure that their products can be marketed in China without a far lower tariff, possibly even zero.

In fact, AmorePacific attributes its' strongest first quarter performance to date to Chinese tourists favouring its skin care at duty free shops.

The company posted record sales of 1.2 trillion won in the first quarter, up 58.2 per cent from the previous year.

China and other Asian countries accounted for product sales worth 241.2 billion, up 50.6 per cent.

Related topics Business & Financial East Asia

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