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Can’t buy at the Louis Vuitton Duty Free?… Withdrawal after being furious about sweeping away Chinese goods

picture explanationLouis Vuitton is reducing its domestic duty-free shop business and strengthening its department store sales force. The photo is a Louis Vuitton men’s specialty store opened last month at the Hyundai Department Store Trade Center in Gangnam-gu, Seoul. [사진 제공 = 현대백화점]

Louis Vuitton is drastically reducing its domestic duty-free shops. It is because of the judgment that the damage to the brand has become serious as ‘Daigong’, a Chinese bag dealer, has taken over the empty seat of tourists, which has plummeted due to the COVID-19 crisis. Louis Vuitton plans to strengthen its premium sales strategy by expanding stores in department stores instead of duty free stores.

According to Moody David Report, a British duty-free distribution magazine on the 17th, Louis Vuitton plans to close additional stores in the Shilla Duty Free Jeju store, Lotte Duty Free Busan store and Jamsil World Tower store in March. This is the closure of Lotte Duty Free’s Jeju branch following the recent suspension of operations. The media reported that Lotte Duty Free, Shilla Duty Free, and Shinsegae Duty Free also plan to withdraw all other downtown duty free stores between October this year and March next year. It is known that Louis Vuitton will develop its duty-free business based on airport duty-free shops instead of downtown duty-free shops. Louis Vuitton plans to maintain the duty-free shop in Terminal 1 of Incheon International Airport and open a second store in Terminal 2 next year, the media reported.

The decision to reduce the downtown duty free shop was made in the judgment that Daigong accounts for most of the duty free shop sales and is undermining the brand value. In 2017, the number of Chinese tourists decreased sharply due to the retaliation of the Chinese High Altitude Area Defense (THAAD) and the COVID-19 outbreak. Daigong purchases products in bulk at downtown duty-free shops and sells them at a profit to Chinese consumers. Currently, it is known that the dependence on Daigung sales of downtown duty free shops reaches 90%. Louis Vuitton is very concerned about the brand image damaged by illegal distribution of Daigong. The reason why the company decided to increase airport duty free shops in China is to prevent illegal distribution of Daigong. According to foreign media, Louis Vuitton plans to enter duty-free shops in six airports in China by 2023 and open a second store at Hong Kong International Airport.

Also, Louis Vuitton is expected to expand its profitable department store business. This is because the consumption of luxury goods has increased significantly as overseas travel is restricted due to the COVID-19 crisis. In fact, Louis Vuitton Korea’s sales in 2020 recorded KRW 1.467 trillion despite the COVID-19 situation. This is a 33% increase from the previous year’s 784.6 billion won. Although 2020 was the year with the lowest sales in the fashion industry due to chaos caused by the pandemic, Louis Vuitton’s growth was steep. As demand for luxury goods exploded, Louis Vuitton raised prices five times last year alone. Last year’s sales are also expected to have grown by more than double digits compared to the previous year.

Recently, luxury brands are so popular that there is an ‘open run’ procession in front of department stores waiting in line before opening to enter luxury stores. As the price increases of luxury brands such as Hermes, Chanel, Rolex, and Tiffany continued from the New Year, Louis Vuitton’s product price increases are expected to continue. An official from the luxury industry said, “The marketing strategy of luxury companies is to strengthen the sales of profitable department stores rather than the duty-free business that sells them at relatively low prices.” The opening of a Louis Vuitton men’s store in the Hyundai Department Store Trade Center last month is part of this strategy. There is growing concern that Louis Vuitton’s withdrawal from duty-free shops will weaken the domestic duty-free industry’s status. This is because other luxury brands can implement a ‘duty-free shop’ strategy.

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[ⓒ 매일경제 & mk.co.kr, 무단전재 및 재배포 금지]

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