Cut By Another 50 Won, About a Month After the Last One
In July 2026, Korea's four duty-free operators raised the reference rate for domestic-brand goods from KRW 1,450 to KRW 1,500. At the time, it was a move to counter a weakening won by lowering the dollar-denominated price of domestic goods and defending price competitiveness for foreign customers. Lotte and Shilla applied the KRW 1,500 rate from July 8, Shinsegae and Hyundai from July 9.
But once the won-dollar rate turned and started falling, the reference rate was cut from 1,500 to 1,400 in August, then cut again to 1,350 in September. The won-dollar rate, which stood around 1,560 in early June, had fallen to around 1,330 by September 9 — and the reference-rate cuts appear to be a continuing effort to narrow the gap between the reference rate and the actual market rate. The adjustment history since June 2025 is as follows.
| Effective | Change | Direction |
|---|
| June 2025 | 1,400 → 1,350 | Cut |
| November 2025 | 1,350 → 1,400 | Raise |
| March 2026 | 1,400 → 1,450 | Raise |
| July 2026 | 1,450 → 1,500 | Raise |
| August 2026 | 1,500 → 1,400 | Cut |
| September 2026 | 1,400 → 1,350 | Cut |
Counting the June 2025 adjustment, the rate has changed six times in about 15 months. Looking at just the past year, it's been adjusted five times since November 2025. Compared with the industry's own account that the reference rate was typically revised once every three to four years before the pandemic, the recent adjustment cycle has compressed sharply.
The Reference Rate and the Market Rate Are Different Concepts
Understanding this adjustment requires separating two different exchange rates used in duty-free pricing.
For domestic products — Korean cosmetics, fashion, food, spirits and the like, supplied at won prices — duty-free operators apply their own reference rate to calculate the dollar-denominated sticker price. Since the won supply price is divided by the reference rate, a higher reference rate means a lower dollar price, and a lower reference rate means a higher dollar price.
Imported luxury goods, by contrast, are often priced in dollars set by the brand's global pricing policy. What a domestic customer actually pays in won depends on the exchange rate on the day of purchase, the rate the duty-free operator applies, and factors like the card issuer's foreign-transaction fee and any preferential exchange-rate terms. Describing it as "the duty-free reference rate applies to imported luxury goods too" would conflate two separate pricing systems.
A KRW 150,000 Domestic Item Goes From $100 to About $111
Converting a KRW 150,000 domestic cosmetic item at a reference rate of 1,500 gives a dollar-denominated price of $100. Lower the reference rate to 1,350, and it becomes about $111.11.
On a simple calculation, that's roughly an 11.1% rise in the dollar-denominated price. This figure, though, is a nominal-price change that doesn't account for discounts, loyalty points, coupons or gift promotions. What a foreign customer ends up actually paying can vary by duty-free operator's promotions and payment method.
Imported Luxury Sees Its Won-Converted Burden Fall
Take the Dior Lady Bag Mini, priced at $5,500, as an example — the exchange-rate effect runs in the opposite direction.
At a won-dollar rate of 1,524.5, a simple conversion puts the price at roughly KRW 8,384,750. Against a department-store list price of KRW 7.5 million, that's about KRW 880,000 higher at duty free. But apply the 1,336.1 rate cited in the September 9 report, and the conversion falls to roughly KRW 7,348,550 — about KRW 150,000 lower than the same department-store list price. On the exchange-rate move alone, the simple converted price falls by roughly KRW 1,036,000.
This comparison, though, is only an illustration of the exchange-rate effect. Actual purchase prices reflect duty-free discounts, membership-tier benefits, loyalty points, card fees, and department-store gift-card or card discounts, so it can't be assumed that every customer sees the same price gap.
A Tug-of-War Between Price Competitiveness and Profitability
Cutting the reference rate raises the dollar-denominated price of domestic goods, which can ease duty-free operators' exchange-rate exposure and margin pressure. But to foreign customers, the same domestic product simply looks more expensive — which can hurt the price competitiveness of K-beauty and K-fashion. Conversely, a falling won-dollar rate eases the won-denominated burden on domestic customers buying imported luxury, which could work in favor of demand recovery at duty-free stores.
According to Korea Duty Free Shops Association figures, total duty-free sales in H1 2026 came to KRW 6.4752 trillion, up 1.8% year over year. Foreign-customer sales were KRW 4.9968 trillion, or 77.2% of the total, while domestic-customer sales fell 12% to KRW 1.4783 trillion — about 22.8% of the total. Even if domestic demand partially recovers on the back of the falling won, foreign price competitiveness for domestic goods remains an important variable given how large a share foreign customers still represent.
Lotte Duty Free: "Six Consecutive Profitable Quarters," Not a "Turnaround"
It would be inaccurate, in describing industry conditions, to write that Lotte Duty Free "returned to profit after six quarters." Lotte Duty Free posted six consecutive quarters of operating profit from Q1 2025 through Q2 2026.
In Q2 2026, its revenue was KRW 904.3 billion and operating profit KRW 31.9 billion, up 35% and 385% year over year respectively. First-half cumulative revenue was KRW 1.6965 trillion and operating profit KRW 64.1 billion. It should also be noted that these are consolidated figures excluding the Busan Lotte Hotel entity, which includes the Busan and Gimhae Airport stores.
Business Impact
The core of this adjustment lies less in the reference-rate cut itself than in how much shorter the adjustment cycle has become. A price variable once managed on a multi-year timeline is now moving on a monthly one. Duty-free operators and the brands they carry are having to revise pricing, discounting, inventory and margin strategy more frequently to keep pace with exchange-rate swings.
On the domestic-brand side, operators need to check whether the rise in dollar-denominated prices is translating into an actual drop in purchases by foreign customers — looking at price sensitivity by country and customer segment, average transaction value, and purchase conversion, rather than simply expanding discounts. On the imported-luxury side, operators can highlight the specific items where the won-converted price now undercuts department stores to make the case to domestic customers, though it's worth noting that the comparison shifts with the exchange rate and ongoing promotions.
✦RIT's Insights
What RIT finds worth watching in this adjustment is that won strength isn't working uniformly in favor of, or against, every category of duty-free goods. Duty-free operators can adjust the reference rate for domestic goods themselves, but the dollar price of imported luxury is largely set by global brand policy. The result is that domestic and imported goods are now moving in opposite price directions within the same store.
What matters operationally isn't predicting where the exchange rate goes next, but building the ability to respond quickly when it moves. Tracking dollar-denominated prices, actual transaction prices, discount rates, sales volume, average transaction value and margin before and after each reference-rate change is what makes it possible to properly judge the adjustment's actual effect.
That said, there isn't yet enough basis to flatly assert that "the reference rate will be cut again in October." Whether the market rate holds stable below 1,350, and how the four operators weigh price competitiveness against profitability, will determine whether a further adjustment follows. The indicators worth tracking from here are whether an October adjustment happens, how foreign sales volume for domestic goods moves, whether domestic purchases of imported luxury recover, and how margins shift by category.
