SOUTH KOREA: SAMICK DUTY FREE
Samick looks for pick up in Chinese visitors as sales remain flat during THAAD crisis
The past year has been a tough period for South Korean SME duty free operators who have had to cope with a series of unwelcome challenges that few, if any, ever imagined they would face. David Hayes speaks to Samick Duty Free.
Above: SME operators including Samick are locked in negotiations with IIAC over rent reductions at T1 related to transferring pax traffic to the new T2.
S
ME operators’ sales and profitability have been seriously affected by the sharp
fall in Chinese visitor numbers after Beijing banned group tours to South Korea in retaliation after the THAAD missile crisis erupted. SME operators, because of
their smaller scale, also continue to face difficulty in obtaining supplies of popular cosmetics and luxury brands, unlike most of South Korea’s larger conglomerate- owned operators. If that wasn’t enough, SME
operators with shops in Incheon International Airport T1 remain tied up in lengthy negotiations with the airport authority seeking a reduction in concession fees to a level they consider fair. This is to compensate for decreased duty free sales due to the loss of custom from passengers flying with Korean Air, KLM, Delta and Air France after the carriers’ recent move to newly opened T2 on
Samick Duty Free’s sales in 2017 are estimated to be about US$60 million, based on revenue figures for the previous year.
TRBusiness 122 TRBUSINESS
January 18. “Comparing 2016 and 2017, our
total sales amount is almost flat because of the THAAD issue,” Kong You Seon, Managing Director and CFO of SME operator Samick Duty Free explains to TRBusiness. “In 2017 our sales decreased 0.3%
in US Dollars, but there was a 1.5% decrease in Korean won (KRW) because the exchange rate changed.” Samick Duty Free is part of the
diversified Samick Speco Group, which includes Speco, an asphalt plant company, musical instruments production and caster wheel manufacturing activities. Samick operates a single 234 sq
m perfume and cosmetics shop under concession DF11 in the centre of Incheon Airport’s T1 main terminal area. This faces the airport’s landmark Louis Vuitton boutique, directly above the connecting T1 concourse shuttle train platform, surrounded by other top line luxury brand boutiques.
Daigou P&C hit Although concession DF11 covers perfume, cosmetics and miscellaneous goods, Samick sells only perfume and cosmetics brands,
as there is a bigger margin on these than for miscellaneous goods, according to Kong. The company’s sales in 2017
are estimated to be about $60m, based on revenue figures for the previous year. “South Korean passengers are
45% of our sales and foreigners are 55%, of which 90% are Chinese customers; so we have to focus on Chinese travellers as their purchasing rate and volume is bigger than others,” says Kong. “Since the THAAD issue started,
some duty free operators have begun to rely on Chinese daigou trader customers. Now there is a lack of certain perfume and cosmetic items because of [daigou trader] purchases. “Duty free operators sell out
downtown and so daigou traders have moved to airports to buy as well; our company’s operating profit is down,” says Kong. As an SME company, Samick has
more limited negotiating power when dealing with international or South Korean beauty brands than larger duty free operators with multiple airport, downtown and online shops. “Although we are an SME
MAY 2018
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