SOUTH KOREA REPORT: CITY PLUS
to open in 2017, the Shinchon store’s opening – along with two other downtown duty free stores being developed by Shinsegae Duty Free and Hyundai Duty Free in Seoul – was postponed by the government until this year. The government’s decision
followed the sudden fall in Chinese visitors in early 2017 after China banned group tours to South Korea in retaliation over the THAAD missile defence system crisis. City Duty Free will now open a
3,000 sq m duty free shop on the third floor of a six- storey commercial complex in Shinchon, which is being renovated and redeveloped. Once opened, shops and food outlets will feature on the first and second floors of the complex. City’s downtown shop licence covers all duty free product categories, but a focus will be placed on perfume and cosmetics, fashion and general merchandise, including electronics. “Perfume and cosmetics will take
up almost 50% of the store retail area,” confirms Hong. “Cosmetics will be in a single
area with mixed international and South Korean brands. South Korean brands will be 70% and international brands 30%.” General merchandise will take
up the other half of the store’s retail floor space. “We want to focus on quality
products not yet in South Korea in our general merchandise area,” Hong explains. “Our customer target is simple
– Shinchon area represents young, intelligent South Koreans. The area also attracts a lot of foreign students and visitors looking for real South Korean culture. “We expect most of our customers
will be FITs [free independent travellers] rather than group tour visitors.” Hong adds that the store’s ‘young and trendy’ design will cater to all nationalities, with fixtures such as a virtual reality zone providing additional novelty. “Also, we will affiliate with the
multiplex cinema in our building and theatres in the area offering free tickets and discounts to our customers,” he adds. “To succeed we need to offer
MAY 2018
something new and collaborate with other cultures, especially for young generation customers.” Brands and products selected
for the store will be affordable and appeal to the young target customer group, TRBusiness hears. “Our store will focus on medium
range practical products and not target luxury products,” says Hong. “We want to focus on moderate
price quality products rather than brand names.” In collaboration with the
downtown duty free shop opening, City Duty Free will also activate an online duty free service. Unlike airport or seaport operations, only operators of downtown duty free stores are permitted to offer internet and online duty free shopping services under Korea Customs Service’s regulations.
Gimpo exit Meanwhile, the company has faced difficult trading conditions during the past 15 months at Seoul Gimpo International Airport and Incheon Seaport Terminal 2, where in the case of the latter it operates a mixed category shop that serves passengers sailing on ferry services between Incheon and China. City Duty Free currently operates
two shops totalling almost 750 sq m at Gimpo International Airport. Its five-year concession began in 2016 and covers liquor, tobacco and other items, excluding perfume and cosmetics, which are sold by Lotte Duty Free under a separate concession. In addition to a 433 sq m departure
shop that sells mostly liquor, tobacco and food, City opened a 300sq m duty free departure shop in October 2017 that displays mostly fashion items. City’s new shop opening was part of a duty free expansion scheme that included Gimpo beauty concession holder Lotte Duty Free unveiling a 300 sq m shop. Hong tells TRBusiness that turning
a profit at Gimpo’s first shop has been ‘difficult’ since opening in 2016, blaming concession fee levels. “Tobacco is almost 50% of our
Gimpo Airport sales, then it’s liquor with a 10% to 15% share,” he clarifies.
A high volume of South Korean travellers are served by City Duty Free’s Incheon T1 shops, near Asia’s flight gates.
TRBUSINESS 125
“We are planning to renovate our Incheon T1 fashion accessory and general merchandise shop. We will introduce new imported and South Korean fashion brands. We are deciding which brands will leave the shop to create space.”
Allen Hong,
Senior Managing Director Merchandising Division, City Duty Free
South Korean customers account for 70% of all purchases at Gimpo, while Japanese passengers represent 20% of sales and Chinese travellers 10%. As TRBusiness went to press, Hong
confirms that City Plus has notified Gimpo Airport owner Korea Airports Corporation (KAC) of the company’s intention to terminate its liquor, tobacco and general merchandise concession [effective 21 April] due to unsustainable trading losses at the airport. “The high concession fee has been
causing a huge loss from the start and now the level of loss has reached the danger level,” Hong points out to TRBusiness. “According to the tenancy
contract, we have to extend our operation for six months after notifying the landlord of termination but we chose to be terminated by the airport authority for defaulting on the concession fee payment in order to avoid a big deficit from the six month-long extension.” «
[For further analysis and reaction from
KAC on City Plus’s withdrawal at Gimpo International Airport, turn to page 112].
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