Sales at South Korean duty-free stores fell during the extended holiday season compared to a year ago mainly due to a sharp drop in incoming Chinese travelers, industry officials said Monday.

Local duty-free shops have prepared a wide range of promotional events to woo shoppers at home and abroad as China's Oct. 1-8 National Day holidays overlaps with the this year's 10-day long Chuseok holiday in South Korea that kicked off on Sept. 30.

Despite the rise in outbound travelers, this year's holiday sales at duty-free shops declined as a diplomatic row between Seoul and Beijing over a missile defense system, according to industry estimates.

In mid-March, China banned the sale of group tours to Seoul in retaliation against the installation of a Terminal High Altitude Area Defense battery in southeastern South Korea, which Beijing sees as a security threat. The move has dealt a harsh blow to local duty-free shops as Chinese tourists were their main customers.

Hotel Lotte's duty-free unit, the operator of the country's top Lotte Duty Free, said its sales in the first week of October decreased 15 percent from a year earlier, with sales by Chinese nationals tumbling 25 percent.

Shilla Duty Free, the nation's No. 2 operator, said sales at its Seoul outlets retreated about 10 percent over the cited period, mainly because of the number of Chinese shoppers.

Chinese travelers visiting the country in the first eight months fell 48.8 percent on-year to 2.87 million, and the downward trend was also reflected during the holiday, according to the data by the Incheon Airport Corporation.

Faced with the unfavorable business environment in China, a growing number of Korean retailers are turning their eyes to Southeast Asian nations to diversify their business portfolios.

Lotte Group, South Korea's fifth-largest conglomerate, is looking to expand its retail businesses in Vietnam and Indonesia.

Lotte Mart said it is currently operating 45 stores in Indonesia and 13 in Vietnam and ready to open another store in Indonesia in December.

In addition, Lotte Group has established a joint venture with Indonesia's conglomerate Salim Group to open an online shopping mall.

The joint venture is aimed at combining Lotte's retail knowhow and Salim's local distribution channel to get a chunk of the rapidly growing e-commerce market in the Southeast Asian nation, the Korean firm said.

The latest move comes at a time when Lotte is set to sell its discount store chain in China to foreign investors, suffering huge operating losses since the missile deployment.

E-Mart, South Korea's top hypermarket chain under Shinsegae, has also reached a deal to sell off five of its six remaining stores in China, effectively ending its 20-year presence in the market.

E-Mart said that it is making a determined push to expand into the Mongolian, Vietnamese, Laotian and Cambodian markets that offer good growth potential. (Yonhap)