Lotte Duty Free Uses Japan’s Visa-Free Reopening To Tourists To Pump Up Korean Sales

Lotte Duty Free is stepping up promotional activity in its core South Korean retail operations on the back of Japan’s decision to open up to international visa-free travel once again, though proof of vaccination or a negative PCR test will still be required. The move offers new opportunities for duty-free sales in both the duty-free retailer’s home market and in Tokyo where Lotte has a large store.

On June 10, 2022, Japan reopened to tourism, but strict rules remained in place. Travelers had to be part of an organized package tour and there was a daily cap of 50,000 on arrivals. From October 11, there will be no arrivals limit, and individuals can enter the country visa-free, which is expected to drive demand from South Korea. Pre-covid, more than 60 nationalities could travel to Japan without a visa and stay for up to 90 days, but the program was suspended during the pandemic as part of the country’s strict safety measures.

Lotte Duty Free, which has had a large 47,400 square foot department store in Ginza, Japan’s main shopping precinct, since 2016, has decided to actively promote travel to Japan in its home market where year-over-year sales have more than trebled in recent months. Koreans and the Chinese had a propensity to travel and shop in Japan pre-pandemic and the company is taking its own steps to ensure the travel bug will be revived.

In August 2019, the Chinese were the top nationality visiting Japan with over a million arrivals while Koreans ranked third after the Taiwanese. In August this year, Koreans ranked second after the Vietnamese, though total arrivals remain substantially down from 2.5 million in August 2019 to just 170,000 this August.

Lotte Duty Free will give away three-day, two-night round trips from Korea to Tokyo on Korean Air on a first-come, first-served basis. The trip for two includes hotel accommodation and will be awarded through a lottery to five customers in its Korean stores who spend more than $500.

Mini-promotions to emphasize travel to Japan

CEO Gap Lee also said that Lotte will hold various events for local customers with an emphasis on Japanese products. As part of a specific ‘live commerce’ activity called ‘LDF Live Travel, Love Duty Free’ the retailer, in partnership with NHN Travel Doctor, will introduce travel products “with special benefits at reasonable prices.”

Various mini promotions will be held until the end of November for domestic customers who are planning to depart for Japan. They range from potential $3.50 (5,000 Korean won) prizes credited on LDF Pay—a payment platform introduced in 2019—on most purchases in downtown duty free shops, to higher-value prizes.

Credits for bigger amounts can be won via lotteries by customers who write reviews about their trips to Japan on Lotte Duty Free’s online site. And through the KakaoTalk messenger service, $35 (50,000 Korean won) LDF Pay coupons will be sold on specific days on a first-come, first-served basis at a 30% discount.

High volume, smaller promotions and giveaways like this are a proven way for the retailer to drive footfall to its websites and downtown duty-free stores in Korea. According to Lotte Duty Free, sales in the past quarter have recovered strongly. A spokesperson for the retailer said: “Despite the high exchange rate, domestic sales in the past three months have increased by 230% compared to the same period last year. We expect the upward trend to continue.”

Reviving Japanese aspirations

The trend has been very different in Japan due to the lack of tourist traffic. When Lotte Duty Free first entered the fledgling Japanese downtown duty-free market in 2016 the retailer had ambitious plans to open four to five similar stores to its Tokyo flagship in other parts of the country. At the time, the company expected that sales from these outlets might reach one trillion won (about $700 million) within a decade.

The promotional activity in South Korea is part of a strategy to spur travel to Japan again and help revive the fortunes of Lotte’s Ginza store. Luxury brands there cover categories such as watches, jewelry, cosmetics, perfumes, electronics and accessories and include K-beauty and K-fashion labels, which were popular with Chinese travelers who, with a few exceptions, remain largely confined within their borders.

Lotte Duty Free recently opened a store in downtown Sydney, Australia, where it claims it is also targeting sales of a trillion Korean won within a decade.