Lotte Duty Free has succeeded in turning a profit in the first quarter of this year. It has been seven quarters since Lotte Duty Free recorded a quarterly profit, last seen in the second quarter of 2023. Analyses suggest that a reduction in transactions with 'Daigong' (Chinese individual traders) has improved profitability.
According to a business report disclosed on the 15th by Hotel Lotte, the parent company of Lotte Duty Free, the company recorded revenues of 636.9 billion won and operating profit of 15.3 billion won in the first quarter of this year. Compared to the first quarter of last year, revenues decreased by 22.3%, but it has turned a profit. In the first quarter of last year, Lotte Duty Free recorded a loss of 28 billion won.
The reduction in transactions with 'Daigong' is cited as a reason for the improved profitability. 'Daigong' procures products from Korean duty-free shops and then transports them to mainland China, distributing them through personal WeChat stores or social networking services (SNS) while making price differentials. In this process, they have received a 30-40% commission from domestic duty-free operators. Lotte Duty Free had previously notified that it would discontinue transactions with 'Daigong' at the end of last year.
Lotte Duty Free plans to maintain a profitability-centered management policy for the time being. The plan is to strengthen marketing aimed at directly attracting foreign group tourists and individual tourists to enhance the competitiveness of the duty-free business.
Lotte Duty Free is also continuously streamlining inefficient stores both domestically and internationally. Following the closure of the Wellington Airport store in New Zealand last February, it plans not to renew contracts for the Da Nang city store in Vietnam and the Darwin Airport store in Australia, which will expire at the end of this month.
A representative from Lotte Duty Free noted, 'Once the temporary visa-free entry for Chinese group tourists is fully implemented in the second half of this year, we expect revenues and profitability to improve simultaneously,' adding, 'From a long-term perspective, we will establish a business structure aimed at stabilizing the duty-free market and securing profitability.'