NEWS ROUND-UP Operators contemplate losses in South Korea
by fashion and general merchandise representing about 20%, liquor and tobacco around 10%, watches and jewellery 7% to 8%, and electronics taking the remaining share of revenue. In spite of last year’s sales growth,
According to industry estimates, in-store and online sales are currently running at about 20% of their previous level since Chinese visitor numbers plunged at the start of February due to Covid-19. South Korea’s total duty free sales rose by
around 30% in 2019 according to industry estimates, totalling around KRW25 trillion last year (US$20.8 billion), and up from KRW19tn (US$17.2bn) the previous year. Total monthly duty free sales averaged
an estimated KRW2.1tn in 2019, which at current exchanges rate (US$1.00 = KRW 1,185) is about US$1.77bn per month. Perfume and cosmetics are estimated
to have accounted for about 60% of South Korea’s total sales last year followed
however, duty free operators’ profitability did not improve as a large share of the 2019 revenue increase was taken up by sales to Chinese daigou wholesaler traders who receive large discount incentives from duty free stores. “Operators fear there could be big
redundancies as they are losing a lot of money now,” said the source. “Last year operators did not make big
profits (unlike cosmetics companies Amorepacific and LG who made huge profits) as they give big discounts to daigou traders and cosmetics brands have not increased margins for operators. The source continued: “Because of
Covid-19 there is no chance to improve business for another three to four months. Operators fear there will be a move to redundancies and layoffs, and to reduce their operation size.” If total duty free sales remain at the
ATÜ Duty Free begins Riga Airport refurbishment
ATÜ Duty Free, the joint venture between TAV Airports Holding and Unifree Duty Free/Gebr. Heinemann is refurbishing its Riga Airport operations in March. The company operates around eight
departures shops at the airport, where it has been present since 2011. Last year, Riga Airport handled more
than 7.8 million passengers – the airport is hoping to exceed 10 million passengers by 2023 – and began work on a terminal expansion project. Ersan Arcan, CEO, ATÜ Duty Free told
TRBusiness: “We are adapting our offer to the improving Riga Airport. [Consumers] deserve more brands and more square metres. We are doing this to take advantage
of the demand. I believe we will experience improvement towards the end of the year.” Meanwhile, in Tbilisi, Georgia where ATÜ
runs four departures duty free stores at the airport, the suspension of direct Russian airline flights to Georgia, implemented on 8 July 2019, due to tension between Russia and Georgia is impacting the business.
Rent cuts at Incheon ‘under the microscope’
Incheon International Airport Corporation (IIAC) is studying plans offering concession relief to its small and medium-sized duty free tenants after the South Korean government launched a fiscal stimulus package to boost the economy. Asked about rent reductions for SMEs and
whether there would be future concessions for larger duty free operators, IIAC said: “All things related to rents are currently under consideration following the guidelines of our government. For this reason, we cannot share the details at the moment.” The Ministry of Economy and Finance
announced in March a monetary support package worth more than KRW20tn/$17bn to boost the economy, which includes rent concessions for SMEs at Korean airports [a subsequent budget of KRW11.7tn/$9.8bn was pledged on Wednesday 4 March – Ed. See
TRBusiness.com for the updated story]. Separately, IIAC is yet [correct at press time]
to reveal its plans for a potential rebid of the Terminal 1 beauty (DF2) and fashion and accessories (DF6) duty free concessions following a dearth of bids.
current level until the end of June (about 80% below their monthly average in 2019), South Korea’s duty free industry could suffer revenue losses in the region of KRW6 tn to KRW8tn (US$4.2 to $5.6bn) in addition to lost sales recorded in February.
LIAM PAYNE
HUGO.COM
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