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SOUTH KOREA REPORT: SM DUTY FREE


60-70% of sales.” One of four new downtown duty


free locations approved for opening in the capital in 2015, SM Duty Free opened its shop shortly after opening its Incheon store in October of that same year. It is located in the Hana Tour


Group’s Seoul head office building close to the historic Insadong cultural district and near to City Hall in the centre of Seoul’s popular tourist, shopping and entertainment area. It occupies a total footprint


of 9,977sq m, comprised of 9,194sq m of retail space and a 783sq m warehouse. The duty free shop occupies the


seven lower floors of Hana Tour’s head office building, including the basement level, while the head office now occupies the eighth to 12th floors. Slower to develop than expected,


sales in the downtown store reached US$60m in 2016, a figure that is half the original targeted amount. Competition among existing


downtown duty free operators and newcomers was a major factor limiting revenue growth in the shop’s first year of operation, said Lee. “We will have a stabilisation period


downtown. When we opened the shop we faced severe competition. We need to strengthen our brand diversity to meet the local South Korean duty free market trend. “We need new young and


rising brands, but we still need good relationships with those powerful players.”


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Samsonite items and South Korean red ginseng. “However, they normally buy and


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liquor at the airport.” Hong Seok Ho tobacco products


Korean, Chinese and English – now represents 30% of the downtown store’s overall revenue. South Korean customers currently


The website – which can be read in Also inside


account for 95% of online sales, according to Lee who added:


May 2017 20


YEARS 1997-2017


TRBusiness Annual South Korea Report


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SM Duty Free’s top two South Korean cosmetics brands are Sulwhasoo and The History of Whoo.


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“Our perfume & cosmetics sales are 50:50 international and South Korean brands at Incheon Airport, but downtown South Korean cosmetics brands represent about 60-70% of sales.”


Lee Sun Young, SM Duty Free


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


Growth of online business One area of the business that it growing quicker than expected, is the company’s online business. Sales through the company’s


website have recently grown, due to an increase in the number of South Korean users, who are choosing to buy online before travelling overseas. “The sales share for outbound


South Korean passengers is growing. In February this year, we were selling US$100,000 daily through the Internet. “The main online


This content is for subscribers only. To receive a full digital copy of the May issue,


Offline Korean SPH drops “Downtown, 60% of our sales are made by Chinese customers. At the start it was 70-80%, but the share dropped in correlation with Chinese group tours; also, our collaboration with Hana Tour has increased.” Although online sales are rising,


plus 12 monthly print editions and the critically acclaimed TRBusiness Top 10 International Operators Report, please visit


per capita spending by South Korean customers has been falling since the downtown store and online shopping service opened. The average price paid for fashion


purchases fell by almost one third to about $500 in 2016 from $700 registered in the prior year. “The reference price is dropping,”


www.trbusiness.com/subscriptions


he said. “This year I think it will be $350. People are not going to buy a bag every year; on their return visits they may buy a smaller purse item. “South Korean people want


customers


are South Korean; they buy mainly cosmetics, international brands and some fashion items such as


MAY 2017


affordable luxury goods. People are not buying expensive luxury goods on the Internet. They want small and medium brands with unique designs and features.” Etro is currently the SM Duty


admitted Lee. “Frederique Constant is okay; the main price range is US$1,000 to $3,000. Fred is also doing well as both are popular with South Korean customers.” «


brand among South Korean customers and Chinese visitors, among which bags are popular items to purchase. Local customers also like to


purchase leather goods and jewellery from Vivienne Westwood, the third best selling fashion brand. “Watch sales are not so good,”


Free shop’s top brand with bags and apparel items in high demand among South Korean customers. Coach is the second best-selling


Korean National Tobacco Group products are the top selling tobacco brands.


TRBUSINESS 135


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