SOUTH KOREA REPORT: SM DUTY FREE
“Before our revamp we had 28 international fashion and watch brands in our basement floor. Some moved up to the first floor and some luxury, high-priced brands left our store.”
Lee Sun Young, SM Duty Free
Unsurprisingly, last year’s drop in Chinese visitor numbers caused many international cosmetics and luxury brands to review their presence in South Korea’s downtown duty free market, with many giving up weaker locations to reduce costs. “The situation for perfumes and
Group’s Seoul head office building, the shop was one of four new downtown duty free stores approved for opening in the capital that year. According to Lee, SM Duty Free’s
downtown store occupies 9,977 sq m of floor space, 9,194 sq m of which is occupied by retail. 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 floors eight to twelve.
P&C volatility SM Duty Free has placed its perfume and cosmetics zone on the second floor to take advantage of the large display area. “There is not enough space on our
street first floor level for the perfume and cosmetics brands that we want to display, so we have put perfume and cosmetics on the second floor,” Lee explains. “We have changed some brands
– DPC South Korean skin lifting products have come in, while Caudalie and Revlon have left. Now it’s 50:50 South Korean to international brands.”
cosmetics brands is better than for fashion brands as we still have Estée Lauder, Dior, Jo Malone and Versace,” confirms Lee. “Perfume and cosmetics are over
80% of our downtown shop sales. These days perfume and cosmetics brands are not happy with the South Korean market situation. All of them want to restrict their outlets here as the market is not doing great.”
Online sales surge SM Duty Free’s third floor features an assortment of international and South Korean local brands, which include Victoria’s Secret, Calvin Klein and Korean Red Ginseng. “We have opened our ‘Japanese
Style’ multi-brand shop, which has famous brands such as Mikimoto pearl content cosmetics and Germanium bracelets,” says Lee. “These provide satisfaction to
travellers who want buy Japanese products. This is a test, if it is successful we might open a British or a Swedish speciality shop – the concept is there.” Meanwhile, online sales have
grown quickly over the past year and are expected to double during 2018. “Our online internet business is
growing,” says Lee. “It’s $50,000 daily now – it’s
mostly perfume and cosmetics. We [now] expect about $100,000 online daily sales. It’s mostly Chinese customers. “We offer all kinds of brands and
we follow brand guidelines for sales with limits on skus. Customers pick up international brands and South Korean products at Incheon Airport, but they can pick up South Korean products downtown as well.” Through its connection with Hana
Tour, SM Duty Free is looking to attract both Hana Tour’s outbound passengers and inbound passengers with its new themed entertainment and speciality shopping zones. “We did new shop trials last year
using our mother company Hana Tour’s brand equity,” Lee explains. “We are giving people a cultural-
related shopping experience. That’s the reason we opened our Running Man theme centre and our Japanese shopping zone.”
Incheon T2 targets Meanwhile, SM Duty Free is reporting growing sales in Incheon Airport’s new T2 where the company runs two adjacent shops totalling 741 sq m under concession DF4. SM Duty Free opened its new T2 shops on January 18. These consist of a mixed category main shop and a second shop called ‘I am Shopping’ that sells fashion goods and other products made by South Korean SME producers. “We have about 200 brands in our
T2 main store that sell perfume and cosmetics, liquor and tobacco, food and souvenirs,” says Lee. “Perfume and cosmetics is
the biggest category in terms of display area. We have 281 sq m for perfume and cosmetics. Sales are 50:50 for South Korean and international cosmetics.” Liquor and tobacco is the major
SM Duty Free liquor and tobacco outlet at Incheon T1. 120 TRBUSINESS
category in SM Duty Free’s T2 mixed category shop, accounting for 45% of total sales in the new terminal, while perfume and cosmetics are 35% of its total T2 sales. Sales are equally divided between South Korean souvenir items and local food and confectionery in the company’s ‘I am
MAY 2018
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