SOUTH KOREA REPORT: LOTTE DUTY FREE
May 2017 20
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Lotte is facing a year of uncertainty as Beijing targets the group, in reprisal for its decision to sell a golf course to the South Korean government that will be used to install equipment for the THAAD missile system. David Hayes reports.
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LAGARDÈRE IN ROME | ACI CONFERENCES’ REVIEW | LOTTE DUTY FREE | DFS GROUP SHILLA | SUNRISE | EVER RICH | CHANGI AIRPORT | SINGAPORE CRUISE CENTRE | CHINA DUTY FREE | INCHEON AIRPORT | HDC SHILLA | HANWHA GALLERIA | SM DUTY FREE WILLIAM GRANT & SONS | PERNOD RICARD | BROWN-FORMAN | BEAM SUNTORY | BACARDI BEAUTY IN ASIA REPORT | COTY’S PHILIPPE MARGUERITTE | PEOPLE NEWS | NOW & THEN
L
otte Group was the first to be targeted by the Chinese government over the THAAD
missile deployment, but all South Korean duty free operators and the nation’s tourism industry will be affected by the reduction in Chinese visitors until the diplomatic crisis is resolved. However, that will not happen until
South Korea’s own domestic political crisis is resolved, hopefully with the forthcoming mid-year election of a new President, following the recent impeachment of President Park Geun Hye over a corruption scandal. This year’s uncertain business
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growth in Chinese visitor numbers, together with the company’s proactive response to the loss of its Lotte World Tower concession, which the company eventually won back. As reported by TRBusiness, the group subsequently re-opened the store earlier this year. Following the surprise loss of its
outlook follows a record year for Lotte Duty Free in 2016. The company’s total duty free sales in South Korea reached US$5.7bn last year; a whopping 36% increase compared with 2015 when the widely reported MERS outbreak caused foreign tourist numbers to fall from June-October and reduced Lotte Duty Free’s revenue growth to a more modest +4.9%. Lotte’s stellar performance in 2016 was achieved on the back of rapid
MAY 2017
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Lotte World Tower shop license to a rival bid when the five-year concession was tendered at the end of 2015, Lotte Duty Free announced plans to expand its flagship Sogong downtown store in the Lotte Department Store in central Seoul.
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COEX sales jump +43% Work to extend the main store’s overall retail space by an additional floor was completed in June, just as the Lotte World Tower store closed when its license expired. In addition to serving FIT
customers in the Sogong store who would have used the Lotte World Tower shop, Lotte Duty Free was able to serve tour group customers at its nearby COEX downtown store where revenue jumped +43% last
were higher than imported perfume & cosmetics last year, but from June/ July international brands such as Estée Lauder, Lancôme, Dior and YSL sales were bigger than Korean brands,” Kim Te Ho, Managing Director of Lotte Duty Free’s Merchandising Strategy Division, exclusively told TRBusiness. “YSL was especially strong with Chinese customers. South Korean
The company’s total duty free sales in South Korea reached US$5.7bn last year; a whopping 36% increase compared with 2015 when the widely reported MERS outbreak caused foreign tourist numbers to fall from June-October and reduced Lotte Duty Free’s revenue growth to a more modest 4.9%.
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year, buoyed by the rise in foreign customers (predominantly Chinese). Perfume and cosmetics sales were worth almost $3bn in 2016 and currently account for 50% of Lotte Duty Free’s total revenue. “South Korean cosmetics sales
Above: Lotte holds four concessions, including L&T, at Incheon Airport, which were awarded in 2015.
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