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While the company's hotel sector posted an operating profit of 24 billion won, the company's duty-free sector posted an operating loss of 16.3 billion won, driving down the company's overall performance.

Some 80 Percent of sales in the Korean duty-free industry are made by foreigners, according to an industry official.

"It is not an overstatement to say that some 90 Percent of these sales are made by Chinese travellers making outbound trips to Korea. One of the tourist demographics with the highest expenditure rate is Chinese group travellers led by 'daigong,'" said the official on condition of anonymity. Daigong in Korean refers to individuals who bulk purchase Korean goods to sell them back in China.

Korean beauty companies, whose sales also depend largely on Chinese consumers and travellers looking to buy K-beauty products, posted spluttering results, as well.

During the third quarter, Korean beauty giant Amorepacific posted an 8.2 Percent on-year drop in operating profits to 17.3 billion won, while its crosstown rival, LG Household & Health Care, reported a whopping 32.4 Percent on-year decrease in operating profits to 128.5 billion won.

Experts say Korean beauty and duty-free businesses must lessen their dependence on Chinese consumers.

"The industry environment is changing. Especially for the beauty business, Chinese consumers no longer find K-beauty products as attractive as before," said Kim Joo-deok, a professor of the beauty industry department at Sungshin Women’s University.

China's beauty products have become a lot cheaper and the quality of Chinese make-up products has risen more than ever, Kim said. Nationalist consumption is also gaining traction among Chinese consumers in the aftermath of the ban on Korean goods, he added.

"Rather than being swayed by Chinese consumers' actions, Korean companies will need to diversify their targets to other countries such as the US, Europe and Japan," he said.

Lee Yoon-seo

The Korea Herald

Asia News Network

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