SOUTH KOREA. Bids close today for the lucrative rights to operate three new duty free licences in Seoul and one on Jeju Island.
Of the three Seoul licences, two are open to all players but one is limited to small & medium enterprises (SMEs). The Jeju licence can only be won by an SME. Applicants must submit their business plans by today, 1 June, with the winners being announced in July.
Stores must be open by next Spring.
A booming Chinese tourism has driven white-hot interest in the bid, which is set to feature the country’s strongest travel retail players and a number of powerful local market companies.
The competition, the first of its kind in a decade and a half, will be assessed on a 1,000-point scale, with 500 allotted to management, financial and logistical expertise and the balance to contribution to the tourism industry, social impact and, crucially, the perceived support of SMEs.
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The numbers tell their own story: Selected arrivals to South Korea by gender and nationality for April 2015 underline the continued boom in Chinese travel; Source: Korea Tourism Organization |
Travel retail is perceived as a beacon of light in an otherwise moribund Korean retail sector. As reported, Chinese arrivals to South Korea increased by +31% year-on-year in the first four months of 2015 to 2,067,872, representing a 45% share of all visitors.
Departures by Korean nationals rose +26.7% in April to 1,495,460 and by +21.1% in the first four months to 6,192,290.
Likely bidders are:
Lotte Duty Free, which will participate in an alliance with Jungwon Duty Free, (a SME duty free retailer based in Chungbuk province), at the Lotte Fitin facility in Seoul’s Dongdaemoon area. The two will effectively share the property with each bidding for separate licences.
Shinsegae, the powerful department store-to-duty free retail group.
Hanwha Galleria, which is planning a duty free shop at the 63 Building in Yeoeuido, a popular shopping and entertainment facility.
Hotel Shilla and Hyundai Development Company (HDC) have forged a joint venture company called HDC Shilla Duty Free, with plans to open the country’s largest duty free store in HDC’s Youngsan iPark mall.
Walkerhill Duty Free owner SK Networks plans to establish a duty free shop in the Cerestar building in Dongdaemun, central Seoul.
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How local media Arirang reported the duty free bidding war |
Hyundai Department Store, the retail-to-fashion-to-restaurants consortium, plans to build a duty free shop near the hip Hongik University area in Mapo District.
E-Land Group: The latest company to announce its interest, having tied up with international travel retail giant Dufry (which confirmed to The Moodie Report that it has signed a MOU) and powerful Chinese tour agency Wanda Tourism. E-Land intends to collaborate with the area’s 20,000 shop owners, street performers and artists to deliver a new twist on duty free shopping.
STRONG SME INTEREST
Several SMEs have also indicated their interest in the Seoul bid. They include:
Eugene Group, which sold its electronics retailer Himart to Lotte some years ago, plans to site its duty free operation in the old MBC broadcasting headquarters in Yeouido.
Hana Tour, which won a recent Incheon International Airport tender under the name of SMEs, is bidding based on plans to open a store at its headquarters in Ankookdong near Gwanghwamoon.
If successful, hotel-to-casino group Paradise, which sold its Busan downtown duty free business to Shinsegae in 2012, will open in the SK Myeongdong building (19.9% held by Paradise).
Korea Fashion Associations, (a consortium of the association’s member companies) would open in Dongdaemoon.
Another likely candidate is High Brand, which runs an outlet business in Yangjae, Gangnam-ku, the nominated location for any duty free operation.
TARGETING THE HOT SPOT OF JEJU
For Jeju, also benefitting from a Chinese travel boom (accentuated by the island’s visa-free status for Chinese tourists), Jeju Tourism Organization (JTO)is considered the front-runner while several SMEs are considering whether to bid.
JTO will site its operation in Hotel Lotte Jeju’s basement area currently occupied by Lotte Duty Free. The latter will soon be relocating to Jeju City, following its successful bid earlier this year for a new duty free licence, heading off competition from The Shilla Duty Free and local construction company Booyoung Group.
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Selected arrivals to South Korea by purpose and nationality for April 2015; Source: Korea Tourism Organization |
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Accumulative figures of selected arrivals to South Korea by gender and nationality for the four months to April 2015; Source: Korea Tourism Organization |
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Accumulative figures of selected arrivals to South Korea by purpose and nationality for the four months to April 2015; Source: Korea Tourism Organization |
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Outbound travel by Koreans by gender (above) and age (below) in the YTD |  |
