SOUTH KOREA. The future of four vital downtown duty free licences, three in Seoul and one in Busan, will be decided in coming weeks in decisions that have the ability to reshape the country’s travel retail landscape.
The four licences are currently held by Lotte Duty Free at its flagship store in Sogong-dong, Jung-gu, Seoul and the Lotte World Mall, also in the Korean capital; WalkerHill Duty Free in Seoul; and Shinsegae Duty Free (formerly Paradise Duty Free) in Busan. They all expire in late 2015 as follows:
WalkerHill Duty Free: 16 November
Shinsegae Busan: 15 December
Lotte main store: 22 December
Lotte World: 31 December
Submissions are due in to the respective regional Korea Customs Service offices by 25 September. The documents are then sent within eight days to Korea Customs Service headquarters in Daejeon with evaluation and selection within 60 days. The winners (if new licence holders) will be expected to open their stores within six months.
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(Above and below) Lotte Duty Free has poured huge investment into its impressive new Lotte World Tower operation but has to fight to renew its licence |
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Local sources say a further new licence may be issued in Seoul next year, on top of the three additional licences granted in July (plus in Jeju, awarded to Jeju Tourism Organization).
Historically, the licence renewals would have been a bureaucratic formality. But a 2013 law change to the renewal process, allied to a booming Chinese shopping business (aside from the recent MERS-related blip), intensifying competition and a proliferation of retailers (and licences), means potentially tough contests for each licence.
Lotte treating the challenge with deadly seriousness. It simply cannot, must not, lose either licence, partly due to “˜face’, but much more critically due to the imminent US$8.5 billion public float of Hotel Lotte, the key vehicle for the group’s South Korean businesses.
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Shinsegae Duty Free, formerly Paradise Duty Free, in Busan is the flagship travel retail location for the department store giant. But it would dearly love a Seoul downtown presence. |
Department store operator and travel retailer Shinsegae, which surprisingly missed out on all the new Seoul downtown duty free licences awarded in July, is considered certain to be a strong contender this time around for one or more of the Seoul licences, while trying to ensure it retains its own licence in Busan.
Hyundai Department store (as opposed to Hyundai Development Company/HDC which is partnering with The Shilla Duty Free in one of the new Seoul licences at Yongsan I’Park Mall, which will open late this year) may be another, while it is possible that Shilla/HDC could also contest the Busan licence.
Other participants, including a rumoured big-name company, are expected to emerge in the run-up to the submissions.
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The long-established WalkerHill Duty Free in Seoul invested millions last year in an ambitious refurbishment but still has to mount a defence of its licence |
To anyone outside South Korea it would seem inconceivable, almost preposterous, that a retailer as powerful, professional and influential as Lotte could face the loss of either of its blue-chip Seoul licences (it has a third unexpired licence at the Coex Centre).
One is the biggest downtown duty free door in the world, the second is an acclaimed new store (viewed by The Moodie Report yesterday and highly impressive) into which huge investment has just been poured as part of the extraordinary Lotte World Tower development. Additionally, Lotte’s omni-media skills and team are considered by many to be the best in the industry worldwide, particularly in their engagement with Chinese visitors, who are so crucial to the Korean economy.
But these are changing times in the country with mounting anti-chaebol (conglomerate) political and popular sentiment and resentment of Lotte in some quarters due to its perceived strong Japanese links.
“Usually the renewal is a piece of cake,” one senior industry source told The Moodie Report in Seoul this week. “But this time even Lotte is afraid.”
FOOTNOTE. The Moodie Report will explore the changing face of Korean travel retail in a major feature within our October Print Edition. For extended coverage on the licence renewal issue, see this week’s edition of The Moodie e-Zine
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Lotte Duty Free’s flagship Seoul store is one of the great travel retail doors. But even that licence is not guaranteed going forward. Picture: Korea Tourism Organization |
