SOUTH KOREA REPORT: SHINSEGAE DUTY FREE
[On the Incheon Airport T2 tender]: “For a big operator it’s important to anchor the image and to pull customers into your retail zone, but the cost to anchor in that size and zone is questionable. It’s a matter of the minimum payment level.”
Hong Seok Ho, Shinsegae Duty Free
“We focused on perfume & cosmetics which met Chinese needs as they buy mainly perfumes, watches and fashion accessories.” Occupying the eighth to 12th
floors in the Shinsegae Myeongdong Department Store in the capital’s historic central Namdaemun tourist district, Shinsegae’s first downtown duty free store in Seoul features new international and South Korean brands along with a growing collection of top line luxury brands. “We opened with many new
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Boasting 15,138sq m of total duty free retail space, the Shinsegae Duty Free Myeongdong shop is one of the largest downtown duty free stores in Seoul, with perfume and cosmetics occupying the entire 3,900sq m 10th floor. This is where arriving customers register before starting to shop. In addition to large retail space,
YEARS 1997-2017
the 10th floor includes an 8m-high atrium-style area that features a sparkling revolving carousel, surrounded by video screens positioned around the atrium walls. “We are still inviting new brands to
according to Hong. South Korean cosmetics
May 2017 20
TRBusiness Annual South Korea Report
our shop, especially to the perfume & cosmetics floor,” Hong said. “Recently we invited Aesop; they opened with a counter and back wall display in February.
Hong Seok Ho
South Korean and imported brands; for example, Addiction of Japan and Vidivici cosmetics of South Korea,” said Hong. “Also, we opened a multi-brand
Hair Zone for men and women. It’s a new idea that did not exist before in South Korea. “We have made a big success of it;
we have shampoos, hair cream and all types of hair care products. “We created our Hair Zone as
a special section in the beauty area. We may do Hair Zones in our Busan Centum and new Gangnam downtown duty free shops now as well.”
Shinsegae shoots for $1bn sales target in 2017... p115
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More ‘effective’ brands “Giorgio Armani started mid-March and we will have Squus of Japan by the end of April (a mid-market brand). We are changing and squeezing in more effective brands.” Floors eight and nine, with
a footprint of 3,600sq m each, house luxury fashion, watches and jewellery boutiques, while the 11th floor displays electronics products, character goods and confectionery. Finally, customers can find
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gifts and high-end South Korean souvenirs, a liquor and tobacco area, and customer service facilities on floor 12. Unsurprisingly, perfume &
cosmetics account for 55% of total sales in the Myeongdong store,
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represented 55% of total perfume and cosmetics sales in 2016, in line with Shinsegae’s original forecasts, with top local brands being The History of Whoo, Sulwhasoo, Dr Jart and Laneige. Interestingly, manual and battery-
powered beauty appliances are now among top selling international perfume and cosmetics products in terms of revenue. Beauty appliances by Rifa of Japan
and Estée Lauder were the two top selling cosmetics brands in January and February this year, Hong noted, followed by La Mer and Foreo of Sweden’s facial cleansing appliances. “Nowadays our Myeongdong
store customers [a large percentage of which are 20-30 year-old Chinese ladies] buy colour makeup. Before it was 30-50 year-old
Chinese, but they do not come in large numbers now,” Hong said. Watches & jewellery is the
second largest category and represented 25% of total duty free sales in 2016. Fashion goods & accessories represents a further 15% of sales, while the gifts & souvenirs category accounts for the shop’s remaining revenue. “Our cosmetics share of sales is
a bit higher than we expected, but with fashion there are more brands to come in,” said Hong.
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Chinese: 75-80% of sales “When that happens we expect fashion to be 25% of our Myeongdong sales and cosmetics 45-55%. The watches & jewellery share will be the same or a little less.” Drilling down into data by
nationality, Chinese customers account for 75-80% of the Myeongdong store’s
total
sales, while South Korean customers represent 15%. Interestingly, online sales
represent a growing share of the Myeongdong store’s revenue. “Online sales began on the first
Whoo is one of Shinsegae’s best performing cosmetics brands. 118 TRBUSINESS
day of opening and are doing very well,” said Hong. “About 30% of sales are online and we think online can grow more. We are expecting about 40% of sales online by the end of this year.”
MAY 2017
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