Lotte and Diageo lift the lid on Seoul Incheon Airport’s vibrant new liquor experience – 22/10/08

As one of the world’s best fragrance retailers, Lotte has set out to transfer those skills to become the best in liquor, using great brands, high quality settings and exceptional service in its stores at Seoul Incheon Airport

SOUTH KOREA. Diageo, the world’s leading premium liquor supplier, has unveiled details of its partnership with Lotte, the world’s biggest retailer, to substantially grow its brands and the whole liquor category at Seoul Incheon Airport. These details are significant because Incheon is on course to become the top-performing travel retail liquor location on the planet.

The players in this classic three-way ‘Trinity’ partnership share similar ambitions: Incheon International Airport Corp has a vision to become the number one retail airport worldwide; Lotte aims to emulate its block-busting fragrance concession at Incheon where it demonstrated globally-renowned expertise before switching to the exclusive liquor & tobacco concession, in which it enjoyed limited experience; and Diageo held a solid presence at Incheon but sees opportunities for substantial growth of its brands and the whole category, particularly through premiumisation.

Lotte’s considerable success in driving fragrance sales at Incheon was down to investment and commitment to creating an exceptional experience – and Diageo shares the view that liquor can learn a thing or two from the beauty world. As one of the world’s best fragrance retailers, Lotte has, since June 2007, set out to transfer those skills to become the best in liquor, using great brands, high quality settings and exceptional service.

The blended and malt whisky sections at Incheon, including Johnnie Walker, Royal Salute and Ballantine’s brands

Diageo’s intensive customer research highlights the quality of opportunities available at Incheon, particularly in driving premiumisation. That research shows that price is not the core issue for the majority of liquor buyers who pass through Lotte’s stores. This means the quality of the customer experience takes on even greater importance and, delivered correctly, opens up “amazing opportunities”.

Although it is still early days – the new Incheon liquor operation only began trading earlier this year – Lotte’s world-renowned retail expertise is already being felt. When Phil Humphreys, Diageo’s newly appointed Global Travel & Middle East Managing Director, toured Lotte’s new liquor operation for the first time earlier this month, he was more than impressed by Lotte’s delivery so far.

Here, Humphreys gives his vivid impression to The Moodie Report: “The biggest impact is the visual approach. The West Side store is full of vibrant shoppers and the strength of the branding at the back of the store is really enticing with a seductive premium definition that I think delivers much more impact than a front-led and promotion-heavy merchandising approach.

“Compelling premiumisation visuals work right across the category and the super-deluxe whisky category really stands out for me, and in particular Johnnie Walker, Royal Salute and Ballantine’s. Inside the store the ‘Mix It Bar’ is a vibrant and energetic focal point, bringing a tangible sense of excitement to shoppers, interacting with a bar team that really works the space, engaging and truly selling the brands. In fact, throughout the store the liquor consultants are knowledgeable and impressive, all driving conversion and conveying a sense of premiumisation.”

Speaking generally about his business alliance with Lotte, Humphreys is quick to add: “I’m delighted that our partnership with Lotte is causing to drive overall category growth in premiumisation, because this is the approach that will maximise our joint performance. The demonstrable progress we’ve seen so far demonstrates just how important it is to leverage shopper insight to create the in-store environment. When I walked the store with the Lotte team we agreed the success to date now opens up many more opportunities to further build on this great work and unlock even more category potential.”

The white spirits department of Lotte’s new liquor operation, which is all about great brands, allied with shopper insight, design, retail environment, marketing and specialist store design input from UK company Portland Design

What expertise do Diageo and Lotte bring to the Trinity partnership? For Lotte, it is its unrivalled experience as the world’s largest retailer, combined with market awareness and merchandising skills. For Diageo, it is about brands, of course, allied with shopper insight, retail environment, design, marketing and specialist designer input from UK company Portland Design.

The two parties share a clear strategy: support a category approach by optimising design, and offer a great selection, layout, visibility, mechanics, merchandising and marketing.

Lotte Duty Free Buyer Liquor and Tobacco Steve Park

LOTTE LIFTS THE LID ON RETAIL SUCCESS IN LIQUOR

Here, we interviewed Lotte Duty Free Buyer Liquor and Tobacco Steve Park to find out more about the retailer’s approach to liquor retailing at Seoul Incheon Airport, where the stores began trading earlier this year.

Lotte ran the single highest-selling fragrances & cosmetics store in travel retail in the world at Incheon. How will you repeat this success in the category of liquor, which is relatively new to you?

Firstly, the layout:

– We put major brands at the rear area of main shops to maximise customers’ purchasing amount.
– We made a specialised promotion zone in front area of main shops to increase footfall rate.
– We display products by category for easy access.

Secondly, the merchandising:

– We introduce new brands and items.
– We make our premium shops like a fashion boutique, with high-end products and the best service.
– We operate the biggest wine shop among neighbouring Asian airport shops with Grand Cru level items.
– We reinforce Asian traditional liquors and products like SJF, sake, Chunghwa, etc.

Thirdly, logistics:

– We prevent product loss and allocate products efficiently in our branches though our Integrated Logistics Center.
– We are preparing for an automatic order system based on our ERP system.

How will you lift the whole customer experience in your Incheon liquor stores?

– Inside the main shops we arrange various entertainment places, like the ‘Mix-it Bar’ and HPPs.
– We are expanding our promotional strategy linked to our downtown branches. For example, we are implementing a cash voucher, only redeemable in our Incheon airport shops, in our downtown stores.
– We enforce a donation programme to pull customers’ [purchase] value up.

How important are the liquor sales staff at Incheon?

In the Korean liquor market, our customers’ aim is to purchase liquor products as gifts. So they tend to get advice from sales staff. Therefore there is a huge sales gap between skilled sales staff and the unskilled. For example, in the case of jewellery sales in our shop for the previous period, turnover increased by +90%.

How would you describe the liquor stores at Incheon? What is the store ambience?

– “Retail-tainment” shop (retail + entertainment).
– A customised shop.

How important are Lotte Card members to sales at Incheon’s liquor stores? Do you know what proportion of sales are made to Lotte Card holders?

– The total number of Lotte VIP card holders is 1 million.
– In the case of Korean downtown duty free shops, 74% of all customers prefer Lotte DFS to others (Source: Bain & company & Lotte DFS, May 2007).
– In the case of Korean airport duty free shops, 63% of all customers prefer Lotte DFS to others (Source: Bain & company & Lotte DFS, May 2007).
– The proportion of Lotte card holders is 45% of total sales in Incheon airport for the previous period. Currently, it is 25%, which is increasing now and we are looking forward to the figure rising to 40% before the end of this year.

Clearly, the partnership between one of the world’s leading premium liquor suppliers and the top South Korean operator has created an extraordinary, fresh retail approach in liquor, perhaps putting paid to the notion that liquor can never match fragrance for the quality of the retail experience.

MORE STORIES ON LOTTE

Great industry pioneer YS Choi named President and CEO of Lotte Duty Free – 09/05/08

Lotte to open luxury Incheon boutiques today as first quarter business booms – 23/04/08

Hotel Lotte triumphs in Gimhae International Airport duty free tender – 20/07/07

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