Louis Vuitton's duty free shop at Incheon International Airport / Courtesy of Louis Vuitton Korea

By Kim Jae-heun

French luxury goods company Louis Vuitton has started pulling out its business from Korea's duty free sector by putting a halt to its operation of a boutique on Jeju Island as of Jan. 1.

"Our Louis Vuitton store on the island is currently out of service due to the effects of COVID-19. However, the specific date of its permanent shutdown has not been fixed yet," a Lotte Duty Free Shop official said.

The Moodie Davitt Report, a British publisher specializing on duty free and travel retail, reported last June that "Louis Vuitton will progressively withdraw from much of its downtown duty free business ― including its long-standing and expensive Korean presence."

The French firm currently operates four boutiques in Seoul, two on Jeju Island and one in Busan.

"Starting with its store on Jeju Island, Louis Vuitton plans to pull out all of its businesses in the local duty free sector, one by one, until October this year. It is only a matter of time until the company closes down its Seoul duty free boutiques too," an industry source said.

The main reason for the decision is to retain the brand's premium image. Many luxury brands put priority on the scarcity of their products to increase their value. For a decade, the brand image of Louis Vuitton has been tarnished, as so-called "daigou," or surrogate shoppers from China, have been sweeping up French products in Korean duty free shops, especially in downtown Seoul. The Chinese shoppers are paid to purchase luxury goods for customers in the mainland.

They reportedly account for 90 percent of sales at downtown duty free shops here. After the Chinese government stopped its tourists from visiting Korea ― as part of its economic retaliation scheme on the Korean government's decision to deploy a U.S. Terminal High-Altitude Area Defense (THAAD) system in 2017, Korean duty free shops' heavy dependence on these Chinese shoppers has increased more.

Koreans' most favorite luxury watch brand Rolex also withdrew all of its duty free stores except three, located in Seoul, on Jeju Island and at Incheon International Airport. Previously, the Swiss watchmaker operated 10 boutiques here.

Local duty free firms are worried about how they will be affected by international luxury brands' moves to pull out of Korea. There are no other brands to replace brands like Louis Vuitton and Rolex and this could lead to a huge decline in their sales and price competitiveness.