[THE INVESTOR] Hit by China’s ban on selling tour packages to Korea, local duty-free store operators are enticing Chinese shuttle traders, according to the Seoul Economic Daily on July 11.

In most of the duty-free stores that have just started operations, these traders account for up to two-thirds of revenue from foreigners. Even major operators such as Lotte and Shilla are counting on them for one-third of their revenue. 

According to Korea Duty Free Shops Association, the number of foreign visitors to duty-free stores in May was 1.02 million, up 2.6 percent from April, while the revenue from those visitors rose 11.1 percent to US$655.9 million. 

The informal cross-border traders are stocking up on the merchandise and pushing up the figures. These so-called “daigongs” -- mostly individual merchants -- usually purchase genuine cosmetics and take them to the mainland, explained an industry source. They also partner with Korean small and medium travel agents to strengthen their leverage. 

They are now getting hefty commissions and discounts -- up to 30 percent -- more than double of what they got before the THAAD row. 

They are the only option for now, and duty-free stores need to maintain a certain level of revenue lest major brands decide to ditch the store, said another industry source. 

All duty-free store chains that have posted profits in the first quarter, will suffer losses in the second quarter, according to analysts. 

By Hwang You-mee (glamazon@heraldcorp.com)