SOUTH KOREA: LOTTE DUTY FREE Lotte shoots for $7.8bn in 2019
Lotte Duty Free cannot be criticised for playing it safe or resting on its laurels as it very publicly shares a sales growth target of +15%, or an additional $1bn, in 2019. David Hayes asks Jeffrey Davis, Managing Director International Beauty how the company aims to achieve such an ambitious objective and how big a contribution beauty will make.
L
otte Duty Free is reporting a strong start to 2019 as the company pushes ahead with
a major renovation programme of its downtown duty free stores in its home market of Korea. Lotte reported that sales from
its downtown and airport shops in South Korea rose 9% year-on-year in January and February. However, excluding sales at Incheon Airport, domestic revenue rose 22% during the two-month period, raising management’s hopes of a good year. Lotte management reiterates to
TRBusiness that the company will continue to focus more keenly on South Korea’s downtown duty free and online pre-order market, following its exit from three of four concession contracts at Incheon Airport last year. “Business is good, our online
business is flying; Korean customers buy online before travelling, Chinese travellers too,” says Jeffrey Davis, Managing Director International Beauty at Lotte Duty Free, in an exclusive interview with TRBusiness. “Lotte Duty Free decided to focus
on downtown stores when it pulled out of the Incheon Airport Terminal 1 cosmetics and boutiques concessions last year. All our downtown stores are earmarked for renovation.” Lotte plans to expand its
downtown store by a third in the city of Busan on the Korean Peninsula’s southeast coast. Construction work began at the end of 2018 and will involve converting floor space in the adjoining Hotel Lotte Busan into a new retail area. This will enable some select luxury brands to expand and remodel their own boutique displays. “We want our Busan store to
be a shopping destination for the surrounding region,” explains Davis. “We want it to be a flagship store, something unique in the
MAY 2019
Lotte’s Sogong-dong flagship store; the world’s largest selling downtown duty free outlet, registered an impressive $3.8bn in 2018.
market there. “Our Louis Vuitton, Chanel and
Prada boutiques are all expanding; Louis Vuitton is moving position. The expansions are up to about double in size. “We have added Giorgio Armani
and Shiseido Clé de Peau Beauté in cosmetics. We added Tom Ford in March and we are expanding YSL.”
Jeju expansion to complete The large proportion of South Korean customers in Busan certainly separates it from other downtown duty free locations, such as those in Seoul and Jeju, and while fashion goods account for roughly 18% of total sales in most of Lotte’s downtown duty free shops, it is more like 30-40% in Busan, depending on the season. “South Korean customers shop in
our Busan store for fashion items,” adds Davis. “Cosmetics are about 50% of sales in Busan, while overall Lotte Duty Free has about a 67% beauty products share.” Elsewhere, on southern Jeju island, work is underway on the
renovation and expansion of Lotte’s Jeju downtown store and is due for completion around the end of this year. The fourth floor, which is currently
not in use, will increase the shop’s total retail floor space by about a third. “We are expanding the beauty
area in our Jeju store, but we have not decided whether to use all the unused space,” adds Davis. Earlier this year, Lotte extended
the first floor of this store into the adjacent Lotte City Hotel Jeju lobby area after receiving permission from the Korea Customs Service (KCS) in
“Offline is very important; it’s educational. In every downtown store location we plan to build a VIP lounge where we will stage showcase events.”
Jeffrey Davis,
Managing Director International Beauty, Lotte Duty Free
TRBUSINESS 79
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