SOUTH KOREA. The country’s leading travel retailer, Lotte Duty Free, is embarking on a concerted expansion plan at home and abroad as part of its mission to become one of the world’s top three travel retailers by 2018
“We have started globalisation very aggressively, beginning with [the recent opening in Jakarta] Indonesia and bids in LA and Hong Kong,” said Executive Managing Director Merchandising Division Planning Division Lee Hong-Kyun during a meeting between senior Lotte management and The Moodie Report in Seoul this month.
“We will also open a store in Singapore Changi Airport [an 80sq m Korean speciality store in Terminal 2 -Ed], a small but very important milestone.”
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Martin Moodie (second from right) with Lotte Duty Free senior management at the retailer’s Seoul headquarters. From left: Steve Park, Team Leader/Strategy & Planning Team; Lee Jong Hwan, Managing Director Planning Division; Lee Hong-Kyun, Executive Managing Director Merchandising Division and Allen Hong, Chief Buyer/Merchandising Team |
Sales across Lotte’s store network rose by +28% in 2011 to US$2.5 billion. Much of that success was driven by the growth in Chinese shopping. Incredibly, spending by Chinese consumers rose by +110% at Lotte stores in 2011. By comparison, total Japanese spending increased by +24.2% and that of the Koreans by +15.9%.
The surge in Chinese traffic and spending helped drive Lotte’s flagship store turnover to a record KRW1 trillion (US$0.9 billion), a stunning result that ranks the outlet as the world’s most successful downtown duty free store, and representing almost 2% of the total global duty free business. This year the target is US$1 billion.
Lotte commanded a 56% share of the US$4.4 billion Korean duty free market (a figure that excludes inflight,
seaports and JDC-run “˜domestic duty free’ on Jeju Island) last year, ahead of Shilla’s 31%. Lotte’s downtown share was 58%, and at Incheon International Airport it held a 49.4% share, buoyed by its acquisition of AK Duty Free.
The company’s core focus will remain the Korean peninsula, but it is actively scouting acquisition and alliance opportunities as well as a full schedule of contract bids, senior executives say. “We also plan to participate in major biddings that will happen at the end of the year at Changi,” said Lee.
MAJOR KOREAN EXPANSION
In Korea, Lotte has extended the space at its flagship Seoul downtown store by 2,400sq m (having taken over the 11th floor) and is adding an array of big brands (women’s clothing, shoes and accessories label Tory Burch, for example).
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The “˜Lotte Town Star Avenue’ entrance to the Lotte downtown complex features many of the biggest names in K Pop |
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Lotte World in Jamsil, Seoul – already Korea’s biggest duty free store – will benefit from another 1,700sq m of space (taken from the department store), due to open in May 2012.
In the southern city of Busan, the downtown duty free store will also be expanded significantly – the space is
under negotiation – through the creation of an “˜appendix’ building acquired next door to the existing facility.
And on the resort island of Jeju, Lotte plans a dramatic increase in space by the end of 2013. Managing Director Planning Division Lee Jong Hwan said the company has already purchased a new property and knocked down the existing building. In its place a whole new duty free complex will be built near the harbour, including a hotel and duty free shops, specifically targeting Chinese consumers.
NOTE: You can read the full interview with Lotte management in the upcoming issue of The Moodie Report Print Edition, published in hard copy and digital format in early March.
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Sales of Korean cosmetics, especially BB creams, are booming, notably to Chinese travellers |
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