April 27, 2024

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[THE INVESTOR] Korea’s largest beauty firm Amorepacific on Sept. 4 announced a new duty-free sales policy to restrict the number of products individual customers can buy in order to protect its brand from Chinese shuttle traders.

The informal cross-border traders -- called “daigongs” -- purchase Korean products in large quantities and sell them at much cheaper prices back in China. According to industry data, the traders make up almost two-thirds of revenue from foreigners at local duty-free stores. 

“We have tightened rules as the number of Chinese shuttle traders has surged recently,” an Amorepacific spokesperson told The Investor.

Under the new policy, customers are allowed to buy up to five items from each brand such as Sulwhasoo, Laneige and Hera at offline duty-free stores. Previously, the allowable limit was 10. Online purchase is also restricted to up to five items per person, from 20 before.

Korean cosmetics companies have seen their sales fall amid the prolonged diplomatic tension between Seoul and Beijing in recent months. Especially, their duty-free sales were hit hard by plunging Chinese visitors.

Over the months, Chinese shuttle traders have shown huge purchasing power. Big duty-free stores such as Lotte and Shilla are said to depend almost 30 percent of revenue from the merchants, offering them hefty commissions and discounts.

By Song Seung-hyun(ssh@heraldcorp.com)