SOUTH KOREA. Incheon International Airport Corporation (IIAC) today released the much-anticipated duty free retailing tender for the country’s main international gateway.
Eight concessions, five for larger companies and three for small & medium enterprises (SME) at Terminal 1 have been issued. All contracts run for five years.
The IIAC will host a tender presentation on 22 January at 14.00 (KST). Bids are to be presented on 27 February.
IIAC said that the bid is open to Korean and foreign enterprises.
Bidders may participate in a numbers of tenders, but cannot be awarded multiple contracts in the same merchandise category.
Among the five concessions dedicated to large corporations, The Shilla Duty Free will seek to defend three (DF2, DF4 and DF6). Lotte Duty Free and Shinsegae Duty Free currently have one concession each and will be eyeing the chance to gain at the expense of Shilla in a key location, while defending their own turf.
The cosmetics & perfumes concession (DF2) is expected to be especially hotly contested. Shilla currently operates Asia’s key travel retail category at Incheon, Changi and Hong Kong airports, giving it a hugely powerful position across three of Asia’s biggest locations. Lotte Duty Free is sure to push hard to regain its presence in this category (which it exited at T1 in February 2018 citing heavy losses due mainly to onerous concession fees).
Key aspects of the tender:
TERM
- Different contracts may start on different dates but each runs for sixty months (five years) from the day on which the business in the first-to-start zone starts.
FINANCIAL OFFER
The greater amount between the Minimum Annual Guarantee and Percentage of Revenue
A)
- Each operator must make a monthly payment of one-twelfth of the Minimum Annual Guarantee (MAG) from the following month of business starting date to the IIAC.
- MAG for the first year: the amount of agreement
- MAG from the second year: 50% of the rate of change in passengers added to or deducted from the MAG for the first year (The limit to the annual increase/decrease rate of MAG shall be ±9%)
- However, the MAG of the shops located in the Concourse for integrated tender packages (DF3 and DF6) shall be calculated based on the MAG of the fourth year separately presented by the tenant.
- MAG of the fifth year: 50% of the rate of change in passengers(the increase/decrease rate of international passengers departing from Passenger Terminal 1 and the Concourse) added to or deducted from the MAG of the previous year
B) If the Percentage Rent (which equals the semi-annual turnover by merchandise multiplied by percentage rent) exceeds the sum of semi-annual MAG paid, the operator must pay the difference to the IIAC by the following month.
Deposits: Bidders must pay the IIAC a tender deposit of at least 5/100 of the tender price. The tender price of DF 3 and DF 6 is the sum the of MAG.
Bid evaluation
The IIAC will tally the scores for Business Proposal and Financial Proposal to calculate the highest bidder.
In the event of multiple companies having equal total scores, the bidder with the highest scores on business capacity will be selected as the preferred proposer. Should the scores on business capacity also be equal, the proposer with higher scores on the item which carries the highest weight among specific evaluation items of business capacity will become a preferred proposer.
Order of bid weighting:
Concept Descriptions and Merchandising Plans → Customer Service, Marketing and Management & Operation Plans Business Status and → Operation Experience Store Configuration, Design and Installation Plans Capital → → Investment Plan and Pro Forma Revenue and Expense Projections
More details to follow soon.
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