SOUTH KOREA. Lotte Duty Free this morning opened for business at Incheon International Airport, marking a critical comeback to the Republic’s premier gateway after a near three-year absence.
Today is day one of a ten-year concession to sell perfumes & cosmetics and liquor & tobacco across the multi-store DF1 Zone retail footprint. As reported, Lotte Duty Free was awarded the rights in February to operate 15 stores across some 4,094sq m of space.
The retailer offered a minimum guarantee (VAT included) of KRW5,345 (US$3.68) per departing passenger in its winning bid.
Lotte Duty Free said it expects annual sales to exceed KRW600 billion (US$406 million) following development of the DF1 operation.
The Korean travel retail giant has been a conspicuous absentee from Incheon since its deliberately lowball bids for the DF1 and DF2 concessions in the 2023 tender. Those contracts were awarded to The Shilla Duty Free and Shinsegae Duty Free, respectively.
However both retailers served notice to quit those concessions last year, prompting a new tender won by Lotte Duty Free (DF1) and Hyundai Duty Free (T2).
Hyundai Duty Free told The Moodie Davitt Report it will open its new business on 28 April, selling a full range of goods across an extensive store network, including luxury, fashion accessories, perfumes & cosmetics, liquor and tobacco.
Lotte Duty Free said, “The company was selected as the operator for the DF1 zone at Incheon International Airport last February, receiving high praise for its history of over 40 years and operational expertise at major domestic airports such as Gimpo, Gimhae and Jeju, as well as overseas hubs in Vietnam and at Singapore Changi.
“Its financial soundness, demonstrated last year by achieving a profit for four consecutive quarters – the only one among domestic duty-free operators – also contributed to the selection.”
Lotte Duty Free will showcase approximately 240 brands across 15 stores. The stellar line-up includes perfumes and cosmetics such as Chanel, La Mer and Dior, as well as liquor, tobacco, and food products including Ballantine’s, Johnnie Walker, KT&G cigarettes and Cheong Kwan Jang (the world’s #1 ginseng brand from Korea Ginseng Corporation).
To minimise inconvenience for departing passengers, Lotte Duty Free has commenced simultaneous operations across the entire designated DF1 area, including Terminals 1 and 2 and the boarding area.
The renovation is planned to proceed sequentially in consultation with Incheon International Airport Corporation. As part of that process, Lotte Duty Free intends to enhance the customer experience by organising brand and product zones tailored to the trends of outbound travellers, both Korean and foreigners, and by introducing digital experiential content at the store fronts.
To commemorate the Incheon opening, Lotte Duty Free has unveiled a major promotion titled ‘Opening Festa’.
Offline benefits for Korean customers include prizes such as airline tickets and hotel stays in the Philippines, shopping benefits worth up to KRW2.33 million (US$1,575).
These include an additional KRW30,000 (US$20) in LDF PAY exclusive to the Incheon International Airport business and KRW250,000 (US$169) in PRE LDF PAY), and instant point accumulation of KRW10,000 (US$6.75) for payments of KRW100,000 (US$67.50) or more via Naver Pay.
For international customers, the company is also showcasing events linked with partner companies, such as coupons offering up to 5% preferential exchange rates when using WeChat Pay, an instant KRW30,000 (US$20) discount for payments of KRW300,000 (US$200) or more via UnionPay, and a coupon book offering up to US$110 in discounts exclusively for guests of Paradise City Incheon.
Lotte Online Duty Free is also hosting various events, including a special sale offering up to -55% off 20 popular items, the issuance of special coupons on a first-come, first-served basis every day at 11am, a celebratory comment giveaway event to mark the opening of the Incheon Airport location.
In addition, benefits are being offered for simple payment methods such as earning up to ten times the L.POINT when paying with L.PAY, as well as Kakao Pay, Naver Pay, Toss Pay, and Payco.
Lotte Duty Free Head of Sales Yang Hee-sang commented, “Incheon Airport is a symbolic location where Korean and international travellers form both their first and last impressions of Korea.
“As we welcome customers back after three years, we will work closely with the airport authority to build a duty-free shopping environment that satisfies both Korean and international visitors.”
The Incheon store network joins Lotte Duty Free’s extensive travel retail footprint which comprises four downtown locations (the Myeong-dong flagship and World Tower stores in Seoul, Busan and Jeju) and another four on-airport operations (Incheon, Gimpo, Gimhae and Jeju). ✈
Comment: Incheon International Airport without Lotte Duty Free always seemed like a traditional Korean meal without kimchi and bap, writes Martin Moodie. Something elemental was missing.
For more than two decades from the airport’s opening March 2001 (when Lotte Duty Free was awarded one of the four anchor concessions alongside AK Duty Free, Korea National Tourism Organization-run Duty Free Korea and DFS Group), the national travel retail giant had been an ever-present, high-quality force at Incheon.
That all changed with Lotte Duty Free’s famously conservative offer in the 2023 tender, driven by what turned out to be well-justified concerns about the future profitability of the airport duty-free business.
But while Lotte Duty Free has avoided the heavy trading losses suffered by The Shilla Duty Free and Shinsegae Duty Free in the interim, the company increasingly felt exposed by its absence from such a high-profile component of the Asian travel retail landscape.
Incheon has long ranked as the region’s number one duty-free location and historically vied with Dubai International Airport/Dubai Duty Free as world leader. With its Korean downtown business and overseas enterprises all struggling in profitability terms, Lotte Duty Free coveted a comeback, albeit at the right price. An Incheon presence in the key perfumes & cosmetics, liquor and tobacco categories would also add crucial clout to its negotiating power with brands.
The punitive losses incurred by The Shilla Duty Free and Shinsegae Duty Free and their failure to renegotiate terms with Incheon International Airport Corporation ultimately produced that comeback opportunity, one Lotte Duty Free seized with relish.
The company is finally back where it belongs and that traditional Korean offering now complete, replete with kimchi, bap and plenty of tantalising banchan (반찬) side dishes thrown in to complete the feast. ✈
