Online sales of duty-free alcohol triggers controversy in Korea

2023.05.24 13:01:01 | 2023.05.24 13:08:38

[Photo by MK DB]이미지 확대

[Photo by MK DB]



Controversy is growing over the planned online sale of duty-free alcoholic beverages that is led by the Korea Customs Service (KCS) to “strengthen the competitiveness of the domestic duty-free industry.”

Cosmetics and perfumes sold in downtown duty-free shops are already available for online purchases before boarding under the so-called “Smart Order” policy but alcoholic drinks have remained an exception.

In September last year, however, the KCS announced that it will boost efforts to revitalize the duty-free industry by permitting the online purchase of duty-free alcohol.

The National Tax Service, which is responsible for overseeing the implementation of the Smart Order policy for online alcohol purchases, is currently working on introducing an exception for electronic sales.

Under this exception, customers who make purchases from downtown duty-free shops will be able to receive their alcohol at designated flight departure areas.

The measure is aimed at streamlining the duty-free shopping experience and catering to the changing consumer preferences for online shopping, according to the KCS.

However, the introduction of the policy has faced significant opposition from small and medium-sized companies operating in the duty-free sector, arguing that the decision to allow online sales of duty-free alcohol will unfairly benefit only a few large corporations and create an uneven playing field.

They express concerns that the policy could further consolidate the market power of the already dominant players.

Lotte Duty Free, one of the leading duty-free operators in Korea, in contrast, has emerged as a strong supporter of the customs agency’s policy.

Lotte Duty Free, which was recently excluded from the competition among operators at Incheon International Airport’s duty-free shops, aims to maintain its presence in the alcohol market by leveraging online sales from its downtown duty-free shops.

In anticipation of this policy change, Lotte Duty Free has already begun preparations to expand its alcohol section at its downtown duty-free stores.

On the other hand, other large duty-free operators, such as Shilla and Shinsegae that currently operate duty-free shops at Incheon Airport, express concerns and opposition to the policy.

They fear that the introduction of online sales of duty-free alcohol could adversely impact their own alcohol sales and market share. They are hoping that the pent-up spending from the economic reopening will be realized in airport duty free.

These operators argue that the policy may lead to a shift in consumer behavior and divert customers away from their physical duty-free stores and towards online platforms.

Despite the conflicting views among duty-free operators, Lotte Duty Free said that the online sale of alcoholic beverages was a matter pursued by the customs agency to enhance the competitiveness of the domestic duty-free industry.

The policy already received consensus and support from all duty-free operators, said a Lotte Duty Free representative who asked to be unnamed.

The official added that the plan of allowing online sales of alcoholic beverages has been promoted by the KCS since last year to enhance competitiveness of the domestic duty-free industry.

By Kim Gyu-sik and Minu Kim

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