January freeze cuts off large-scale resellers, not individual ones that bring in profits, duty-free operator says

People browse inside a Lotte Duty Free store in Jung-gu, Seoul, Sept. 7. (Yonhap)
People browse inside a Lotte Duty Free store in Jung-gu, Seoul, Sept. 7. (Yonhap)

Lotte Duty Free has resumed transactions with Chinese resellers in anticipation of a renewed wave of inbound tourism, reversing course just eight months after becoming the first major Korean duty-free operator to halt such sales.

According to industry sources on Tuesday, sales to "daigou" — Chinese nationals who purchase goods in bulk in Korea for resale — began ticking up again in June, particularly for global cosmetics brands. Over the following three months, these transactions accounted for around 10 percent of Lotte’s monthly revenue.

“Lotte Duty Free’s sales to resellers reached several billion won last month, and they appear to be gaining further momentum this month,” an industry source said.

Since January, when the company pledged to halt daigou-related transactions in an effort to curb its reliance on high-volume, low-margin sales, such dealings had nearly vanished.

The company clarified that the suspension earlier this year specifically targeted corporate-style daigou channels, referring to resellers operating through organized travel agencies and earning sizable commissions for bulk purchases.

“We’re still open to working with resellers, as long as the transactions are profitable,” a company official said. “Daigou is simply another type of customer and another distribution channel.”

The daigou segment boomed after China banned group tours to South Korea in 2017, following tensions over the deployment of the US THAAD anti-missile system. As the COVID-19 pandemic further dried up tourism, daigou purchases at times accounted for more than 50 percent of total duty-free sales.

Lotte’s decision to freeze daigou deals helped the company return to operating profit over the next two quarters, though it came at the cost of declining sales. According to industry insiders, Lotte’s recent decision may signal an urgent bid to maintain its leading position in the duty-free sector, as rivals Shilla and Shinsegae continue to engage with resellers.

The timing is anything but accidental, coinciding with Korea’s rollout of a temporary visa-free entry program for Chinese group tourists. Parties of three or more traveling through authorized agencies will be allowed to stay visa-free for up to 15 days starting Sept. 29, with the program running through June 2026.

Lotte has moved quickly to capitalize on the shift. Earlier in September, Lotte Duty Free executives pursued new partnerships with major Chinese travel agencies, signing memorandums of understanding with the China International Travel Service Corporation and Qingdao Tourism Group.

The duty-free operator described the new visa-free entry policy as a potential turning point for both Korea’s tourism and duty-free sectors.

Still, murmurs of concern persist, as Lotte’s renewed engagement may rekindle the bruising commission battles that once characterized Korea’s duty-free sector. “We are carefully managing our internal strategy to prevent any excessive competition,” the company official said.


minmin@heraldcorp.com