The law targets Chinese traders known as “daigou,” who make overseas purchases for resale in the mainland. Chinese authorities are clamping down on the practice of proxy purchasing, subjecting it to registration and tax payments since Jan. 1.
The goal is to increase online sales via cross-border e-commerce websites and prevent tax avoidance. Contrary to the largely unregulated daigou trading, the e-commerce platforms must be licensed for business both in China and at the location of imports.
However, January trends show major duty-free store operators in Korea weren’t affected by the recent crackdown, as individual traders, who are difficult to track down, comprise most of the buyers.
According to Lotte, its January sales from Chinese visitors at the Myeong-dong main store saw an on-year increase of 20 percent. Another retail conglomerate Hyundai Department Store’s duty-free shop, launched in November, likewise reported that shoppers from China still make up a major slice of its sales pie.
In 2018, duty-free sales in Korea reached a record high of 19.47 trillion won ($17.23 billion), a 34.6 percent rise for the previous year’s $12.84 billion. Market watchers say the hike was buoyed by the daigou traders.
An official at Korea Duty Free Shops Association said it is too early to assess the impact of the regulation, and forecast that a drop in Chinese sales in the coming months is still a possibility.
By Kim Arin (email@example.com)