SOUTH KOREA REPORT: LOTTE DUTY FREE
“We will convert part of the adjacent Hotel Lotte Busan to duty free shop space. “Some of the extra space will be
allocated to luxury brands. We are now considering which brands.” Fierce competition in Busan’s
downtown duty free market is the major factor prompting Lotte to expand its downtown store retail area to increase brand selection. South Korean customers represent more than 50% of those visiting Lotte’s Busan store. This is the highest South Korean share of customers in all the company’s duty free outlets countrywide. However, while South Korean
customers are the greatest in number, Chinese customers account for the largest share of sales in Lotte Duty Free Busan, notes Kim.
Jeju changes Elsewhere, Lotte is planning to add 230 sq m of retail space to its Lotte Duty Free Jeju downtown store. Completion is expected in October or November. “We are thinking which brands are
best to add; they must be perfume and cosmetics,” clarifies Kim. “Our Jeju shop already has
Japanese and international brands so we want to try different international brands on the first floor. “We want to differentiate the
display concept – even though existing brands may come into the new space we will ask them to decorate in a different style like a pop-up store, but to last longer and increase customer engagement.” Meanwhile, luxury brands have
performed well in many Lotte Duty Free shops recently. Watches and jewellery sales, in particular, have shown strong growth despite the fall in Chinese group tour customer numbers. “Luxury brands have been doing
well; sales increased 14% in 2017,” confirms Kim. “Jewellery and watches showed 22% growth, so we requested an expansion of watches and jewellery boutiques. If a brand is doing well we consider an expansion. “With Louis Vuitton, Chanel and
Hermès, we always consider an expansion. Cartier is doing well while Rolex still is popular among South
MAY 2018 Lotte Duty Free’s liquor and tobacco concession at Incheon T2 commenced trading on 18 January. TRBUSINESS 99 Koreans and all other nationalities.”
Online vs offline In another development, Lotte Duty Free is looking to increase the efficiency of its downtown and airport shop operations this year in readiness to achieve further growth. “Efficiency is very important as we
have limited retail space. If we want to host new brands we need space and must remove lower efficiency goods such as food, electronics and leather goods which have less growth,” says Kim. “We consider moving offline
products to online but some brands do not want this. They want offline space and to keep online as well.” Brand performance, both online
and offline, is analysed to determine the most efficient way to sell individual brands and their products. Brands selling mostly online
are restricted to online sales to reserve retail shop space for other brands with strong offline retail performance. “We found some brands have 70%
offline sales while others are 70% to 90% online, so we try to get them to focus on one channel,” explains Kim. “This happens for perfume and
cosmetics, electronics, leathergoods and food items.” Meanwhile, Lotte Duty Free
recently told TRBusiness it is ‘strongly considering’ submitting new bids to regain the three concessions it recently exited at Incheon Airport T1,
Lotte Duty Free has confirmed it is ‘strongly considering’ submitting new bids to regain the three concessions it recently announced it would exit at Incheon Airport T1.
TRBusiness
when Incheon International Airport Corporation (IIAC) re-tenders the cancelled licences. Lotte’s aim will be to regain the
licenses with a financially viable bid based on the company’s experience of operating the three concessions for the past two-and-a half years. “No one knows how the bid
will be and when it will be,” Kim tells TRBusiness. IIAC is reviewing the situation. “There are many issues – how long
the concessions will be. Some people say the remaining two-and-a-half years; others say five years is proper to ask operators to participate in the bid. “We returned three concessions,
so another issue is whether they are tendered together or separately and if the concourse is combined as at present it is unpopular [with potential operators]. IIAC is in contact with the Customs Office to deal with this issue. “It’s up to the Customs Office
when the next tender will be announced and who can enter the bidding. Not everything is fixed yet.” «
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