Incheon tenders KTO duty free space; limits bids to mid-sized players

SOUTH KOREA. Incheon International Airport Corporation has issued a tender for the retail space currently occupied by Korea Tourism Organization (KTO), whose contract expires at the end of February 2013.

Approximately US$150 million of business (based on 2011 turnover) will be available when the KTO business ends.

The state-owned company, trading as Duty Free Korea, has some 2,510sq m of space at Incheon across 13 stores (trading as Duty Free Korea).

KTO has reacted furiously in the local press to the decision to put the business to tender. Local reports say KTO is considering legal action relating to the decision to put the business out to open tender.

IIAC has split the business into two concessions (DF6 and DF7). Critically, only companies with assets below KW5 trillion (around US$5 billion) can participate in the tender, thus eliminating Korea’s leading travel retail players except for Dongwha Duty Free.

Trading as Duty Free Korea, Korea Tourism Organization runs a wide range of luxury, fashion and general merchandise stores at Incheon International Airport. Its departure from the market presents a major, albeit short-term, retailing opportunity for mid-sized local retailers

The contract term is just two years, from 1 March 2013 to 28 February 2015.

DF6 covers 1,222.3sq m with a minimum annual guarantee concession fee of KRW23,873,733,000 (US$22.1 million), covering all items except for cosmetics & perfume, and liquor and tobacco.

The same product range will apply to DF7, which embraces 1,151.5sq m of retail space and involves a minimum annual guarantee of KRW28,346,167,000 (US$26.2 million).

The tenders will be awarded to the highest financial bidder in each case. Bidding will be conducted on 13 December by electronic tender.

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