SOUTH KOREA: SME OPERATORS
City Plus Duty Free also operates the DF6 concession in Incheon T2, consisting of a food and souvenir shop and a twin-brand fashion boutique. CityPlus is currently controlled
by South Korean-listed Japan Travel Corporation (JTC), after the acquisition from Gwangju-based solar energy technology specialist, Top Sola Co Ltd. The new owner is keen to see
City Plus expand its operations to other airports. Meanwhile, Incheon Airport’s recent T1 duty free tenders attracted wide interest among SME companies, as expected, for the three concessions on offer: the aformentioned DF8 and DF9 mixed category shops and DF10 liquor, tobacco and packaged food licence. One SME operator noticeably
absent from the T1 tender proceedings was Dufry Thomas Julie Korea Co Ltd, a joint venture between Dufry and South Korean company Thomas Julie & Co, which operates the Busan Gimhae Airport liquor and tobacco concession. South Korean duty free operators
had viewed Dufry Thomas Julie’s successful bid for the Gimhae liquor and tobacco licence as a precursor to bidding for licences at Incheon Airport. That would appear not to be the case and Dufry Thomas Julie’s future business strategy remains unclear. Also absent from Incheon
Airport’s SME T1 tenders was Dongwha Duty Free, South Korea’s longest established duty free operator. Eclipsed by its leading duty free operator neighbours in Seoul’s City Hall district, Dongwha’s future remains uncertain. Dongwha has faced difficult
trading conditions in recent years following the loss of top line luxury boutiques including Louis Vuitton, which relocated to the Shinsegae Duty Free Myeongdong downtown store after it opened in 2016. The intention behind creating
SME operators such as Dongwha was simple. The creation of SME operators was the brainchild of the South Korean government to prevent big operators Lotte and Shilla from developing a duopoly. However, weaknesses became
MAY 2020
apparent early on. Part of the problem faced by these
smaller operators is that they have failed to recruit international luxury brands that are essential to attract large numbers of customers to a duty free store. Dongwha’s loss of its leading
brands mirrors problems that newer SME operatorsn – and even larger new entrants – face in trying to bring luxury fashion and cosmetics brands into their downtown stores.
Storm clouds hovering The beneficiaries of SME’s vacant shops have been small cosmetics brands who have boosted their sales while SME operators try to bring in bigger brands. Only time will tell whether South
Korea’s SME duty free sector can survive in its present state once the Covid-19 storm passes. “Before the Covid-19 crisis
about 200,000 passengers used Incheon Airport each day, now there’s less than 10,000; we have never witnessed anything like this,” comments a source at Entas Duty Free, which recently bid successfully to retain its DF10 liquor and tobacco licence at Incheon Terminal 1. “There is a very dark time ahead
for South Korea’s duty free and travel industry; there’s not much we can do to mitigate [against it]. We are just waiting to see how Covid-19 is brought under control globally.” On 1 April, Entas temporarily closed its Entas Duty Free Paradise
“We have got commitments and we intended to open the new boutiques in Q1, but it never materialised. Everything is on hold; we will re- evaluate our entire strategy. We are hoping the Covid-19 crisis will be over by September, but no one knows.”
Entas Duty Free source
City downtown store located next to Incheon Airport in the Paradise City integrated resort. The store closure coincided with the shuttering of the neighbouring Paradise Casino. The Casino also closed in April,
due to a sharp decline in foreign guests who represent the majority of Entas Duty Free’s customers, as only foreign passport holders are permitted to enter casinos in South Korea. Entas was preparing to open new
luxury watches boutiques this year, but will have to review its plans. “Everything was going well until
January, but we saw the Wuhan situation in December and it raised alarm bells for duty free operators and brands; so everything is on hold,” says the source. “We have got commitments
and we intended to open the new boutiques in Q1, but it never materialised. Everything is on hold. We will re-evaluate our entire strategy. “We are hoping the Covid-19 crisis
will be over by September, but no one knows.” «
Entas Duty Free has received a 20% reduction only in its MAG committment from Incheon International Airport as the duty free company is considered a ‘medium enterprise’.
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