SOUTH KOREA. Incheon International Airport Corporation (IIAC) has issued the long-awaited Request for Proposals (RFP) for the duty free retail concessions at Terminals 1 and 2 at the country’s main gateway.
The multiple contracts grouped within seven packages (see below) will each run for ten years with no extensions. Opening dates are set for 1 July 2023, unless an incumbent’s contract expiry means a different start-up date.
Concessionaires will pay a monthly rent calculated by multiplying the number of monthly passengers by rent per passenger to IIAC (see tables).
Other talking points include:
- Duplex stores to be added to the luxury mix
- Tight timeline with bids due by 22 February
- Introduction of an online ‘Smart Duty-Free Service’
- No future rent adjustments (unless in the case of floor space changes) after contracts struck in the event of changes in passenger numbers, airline services and terminal operation
- Bids open to Korean or foreign companies
We will bring you comment and analysis in coming hours.
No future adjustments to rent
IIAC said that the basis for rent per passenger takes into account the operation of a new online ‘Smart Duty-Free Service’ (see below) and potential changes in revenue and conditions. Therefore, the estimated price will not be adjusted despite any changes in the number of passengers, airline services, and terminal operation in the future, the corporation added.
Setting the scene, the RFP noted that from its opening in 2001 until the advent of the pandemic, Incheon International Airport (ICN) had become the world’s biggest airport duty free business with an average annual sales growth of +6%. Sales reached more than KRW2.8 trillion (US$2.2 billion) in 2019.
However, the COVID-19 pandemic prompted a -95% collapse in passenger numbers and duty free sales in 2020, “threatening the airport duty free business ecosystem”.
ICN has seen gradual passenger recovery over recent months with demand reaching 39% of 2019 levels this October.
“IIAC views the tender as the rebound opportunity for ICN’s duty free business, which was hit hard by the pandemic. We are providing different tender packages for concessions and diverse tender conditions in order to address the challenges of the duty free business and ease future uncertainty,” it said.
Timeline
12 January: Tender presentation at IIAC headquarters followed by an airport store tour
21 February: Tender registration at IIAC headquarters
22 February: Submission of Business and Financial proposals
Seven packages
The tender comprises seven proposal packages. These are in line with the existing concessions and are designed to offer customer value to the level of any other overseas airports and maximise convenience for passengers, IIAC said.
Tender qualification criteria
The tender is open to domestic and foreign companies that meet certain criteria (see table). Consortium bids are not allowed. Any qualified bidder may submit multiple tenders for all concessions. A single bidder will not be awarded more than one concession within the same group.
Smart Duty-Free Service
In line with the rapid trend changes towards online shopping and accelerated digital shopping environment, IIAC intends to introduce what it calls ‘Smart Duty-Free Service’ so that passengers can also use airport duty-free shops online (mobile).
The aim is to enhance passenger convenience and provide advanced online and offline services, thereby securing unparalleled competitiveness.
IIAC intends to offer more shopping opportunities to passengers throughout the passenger journey of preparing for a trip, moving to and staying at the airport, and getting onboard “as if the time and space of duty free shops in ICN are expanded”.
IIAC intends to offer unique services differentiated from the existing online duty free shops by linking the services using airport assets (for more details see panel at the foot of the page).
Premises and space details
Duty free shops in both T1 and T2 form what IIAC called a symmetry around the central area so that passengers can drop by stores with key merchandise categories after immigration and have the same shopping experience both in the east and the west. Each terminal is configured with three concepts:
- Luxe Zone with boutique brands in the centre of the terminal
- Core Business Zone with key stores by main category centered on choke points in the east and the west of the terminal
- Street Zone specialised for last-minute shopping on the way to the gates
Duplex stores to make their debut
In this tender, IIAC intends to create duplex boutique stores at the front of the departure areas in the east and the west area so that global luxury brands can open flagship stores that are in line with recent trends, express brand identity and improve the passenger experience.
The Luxe Zone in the center of T 2 will be a centralised shopping area full of global luxury boutique collections. Under the concept of ‘One Shop – One Story’, passengers will experience all merchandise provided by each brand, signature services where brand identity is embedded, and unique interior design in flagship boutiques.
DF1-2022 Concession (Perfume and Cosmetics, East / Liquor and Tobacco, West)
DF2-2022 Concession (Perfume and Cosmetics, West / Liquor and Tobacco, East)
DF3-2022 Concession (Fashion, Accessories, and Boutique)
DF4-2022 Concession (Fashion, Accessories, and Boutique
DF5-2022 Concession (Luxury Boutiques)
DF8-2022 Concession (Concession for SMEs, East)
DF9-2022 Concession (Concession for SMEs, West)
SMART DUTY-FREE SERVICEIncheon International Airport Corporation noted some key aspects of its planned new Smart Duty-Free Service is as follows. ▪ Target customers are not the core customers of downtown duty free shops who are price-sensitive but passengers who prefer to shop at the airport. Smart Airport refers to an integrated platform where ICN passengers can use a mobile app to get all necessary services at the airport including airline check-in, immigrations, security check and shopping easily and conveniently. Smart Duty-free Service will be built in a shop-in-shop structure by linking the mobile duty-free site of each concessionaire dedicated to ICN with the Mobile Guide App of ICN operated by IIAC. The price of the products ordered on tje Smart Duty-free Service platform should be the same as the price of the products sold at Incheon’s offline duty free shops. The same product should be provided at the same price by offering membership discounts and vouchers as per the offline shops and applying the same discount rate, IIAC said. ✈ |
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