SOUTH KOREA REPORT: LOTTE DUTY FREE


Lotte Duty Free seeks double-digit sales growth as it navigates turbulent period


Lotte Duty Free is aiming for a double-digit increase in revenue from its South Korean operations in 2018 after weathering a series of unprecedented challenges over the past 18 months. David Hayes assesses the landscape for Korea’s leading travel retailer.


T


he Chinese government’s ban on group tours to South Korea impacted the country’s


duty free operators – including Lotte Duty Free – in a turbulent 2017 characterised by deteriorating relations between Seoul and Beijing over the positioning of the THAAD anti-missile system in South Korea. For Lotte Duty Free, this coupled


with unsustainable trading losses due to crippling license fees at Incheon International Airport T1, forcing the group to exit three of its four concessions [excluding liquor & tobacco] earlier this year. In an equally grave development,


plans to list Lotte Group have been derailed by the recent imprisonment


of Lotte Group Chairman Shin Dong- bin on bribery charges. The Seoul Central District Court


said this related to a KRW7bn ($6.5m) payment to a confidante of former President Park Geun-Hye in exchange for government favours – providing a Seoul downtown duty free operator licence. In spite of China’s THAAD missile


crisis response, which impacted Lotte Group businesses after the group sold a golf course to the South Korean government to position the US-supplied anti-missile defence system, Lotte Duty Free still managed to post a single-digit sales increase in 2017. Despite the decline in profits –


The popular Star Avenue. MAY 2018


impacted by the Incheon Airport T1 concession fee payments – and margins due to the emergence of the Chinese Daigou (trader) phenomenon, Lotte Duty Free reported total revenue of $5.4bn from its domestic operations in 2017. This was up +3.8% compared with the $5bn total sales recorded the previous year. “Our airport sales decreased [by] 3% last year, but downtown


sales increased thanks to new Chinese customers and online sales prospered, posting a +2.2% increase,” comments Kim Joon Soo, Senior Vice President and Head of Merchandising HQ at Lotte Duty Free. “Our Lotte Sogong, Lotte World


Tower, Gimpo Airport and Gimhae Airport shops all showed growth, but our COEX shop showed negative growth; it needs Chinese tour groups for successful business and was affected by the THAAD issue. “Also, almost 95% of our Jeju


downtown store customers are Chinese but after the THAAD issue started they stopped coming, so our Jeju sales were down.” Lotte recorded sales worth


$990m at Incheon Airport T1 in 2017, fractionally higher than revenue registered the previous year.


Lotte recorded sales worth $990m at Incheon Airport T1 in 2017, fractionally higher than revenue recorded the previous year.


TRBusiness TRBUSINESS 95


Above: Lotte Duty Free is hoping that double-digit revenue growth from its South Korea operations this year will help offset what have been a series of sizeable challenges in the past 18 months.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132  |  Page 133  |  Page 134  |  Page 135  |  Page 136  |  Page 137  |  Page 138  |  Page 139  |  Page 140  |  Page 141  |  Page 142  |  Page 143  |  Page 144  |  Page 145  |  Page 146  |  Page 147  |  Page 148  |  Page 149  |  Page 150  |  Page 151  |  Page 152  |  Page 153  |  Page 154  |  Page 155  |  Page 156  |  Page 157  |  Page 158  |  Page 159  |  Page 160  |  Page 161  |  Page 162  |  Page 163  |  Page 164