TOP 5 ASIA OPERATORS: SHILLA DUTY FREE
sales,” says Kim. “In South Korea, luxury brands are
traffic generators and an indicator of status in the duty free market. Compared to new entrant operators Shilla Duty Free’s advantage is its luxury brands – watches, jewellery and fashion.”
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double-digit sales growth this year,” confirms Kim. “2017 was a bit complicated but we still had healthy growth. “We expect more FITs and
Domestic sales surge Shilla Duty Free achieved $3bn in domestic sales in 2017, a +20% increase compared to the previous year. Perfume and cosmetics is the largest category accounting for 50% of total sales. Shilla’s flagship central Seoul
downtown store is the company’s largest domestic operation. Sales of about $1.8bn in 2017 mark an impressive +25% increase over the previous year and represent about 60% of Shilla’s total domestic duty free revenue. Incheon International Airport is the
company’s second largest domestic operation, followed by the Shilla Jeju downtown duty free store. Sales at Incheon Airport were worth about $650m in 2017, while revenue in the Jeju downtown shop topped $500m last year. Both locations registered double-digit revenue growth. “Spend per customer grew in 2017
compared to 2016. There was a +50% increase in per capita spending for Chinese customers,” says Kim. “We don’t know why exactly, but
in general we feel Chinese people have a high demand for South Korean products. As there is a limited chance for Chinese people to visit South Korea, they must maximise spending when visiting as they have fewer opportunity than previously. “Demand for South Korean
products remains the same. But with fewer opportunity to visit, Chinese customers are willing to spend more to buy the same amount as two or three visits before; we think that’s one of the reasons for this spending.” Following the recent warming of
relations between North and South Korea and improved relations with China, Shilla and other South Korean operators are optimistic that Beijing’s group ban will soon be lifted, allowing more Chinese visitors. “Thanks to the recent passenger increase, Shilla Duty Free expects
MAY 2018
travellers to come to South Korea. Eventually, Chinese visitors will come back, but we expect more variety including Southeast Asians. We are still encouraging other nationalities to come.” The rapid recent increase in
online shopping in South Korea has encouraged Shilla to develop a new sales strategy to increase customer spend. This involves linking the company’s online, downtown and airport shopping opportunities. “Downtown, online and airport
shopping is available to South Korean customers. One of Shilla Duty Free’s advantages is our presence in all three channels,” Kim says. “We try to lure customers into
using all three sales channels through their duty free shopping journey. We encourage multiple visits to all three shopping channels.” For many customers, the duty free
shopping journey begins in Shilla’s flagship Seoul or Jeju downtown store where they receive coupons to spend online after making off-line purchases. Buying goods online is rewarded with another set of discount coupons, this time to spend in a Shilla airport shop. “Online shoppers receive coupons or gift certificates to spend at the
Taeho Kim, Shilla Duty Free
airport; connecting all three sales channels is a key part of our strategy,” Kim explains. “Online shopping has been
flourishing since 2014. This was when we began linking the three channels – it ignited our strategy.”
Triple channel strategy Shilla’s triple channel sales strategy, developed in Seoul, is believed to have encouraged the company in its successful bid for the Jeju International Airport departure shop after previous operator Hanwha Duty Free terminated its contract. “It is early days with Jeju Airport.
We have a temporary store there now,” Kim explains. “We have the leading downtown
store on Jeju Island. We will try to synergise our downtown store and airport shop in Jeju.” Shilla believes online shopping
offers a number of important advantages that will enable it to become South Korea’s major duty free shopping channel in the future. “Perfume and cosmetics is the
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Luxury watches and jewellery brands are among the products that attract customers to the company’s downtown duty free shops.
TRBUSINESS 55
“Thanks to the recent passenger increase, Shilla Duty Free expects double-digit sales growth this year. 2017 was a bit complicated but we still had healthy growth.”
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