TOP 10 OPERATORS 2018 2: LOTTE DUTY FREE
The latest half-year picture is more reassuring, with sales growing by 29% to KRW2.7tn and operating profit at KRW155bn (excluding its operations at Busan and Gimhae Airports), spurred on by the decreased rent payments at Incheon.
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area of 1,407sq m after winning the Liquor, Tobacco and Packaged Foods (DF1) concessions in a competitive tender last year. More than 130 brands feature
across the categories, with a flagship boutique store boasting labels including Johnnie Walker, Royal Salute and Hennessy. Despite the fanfare, it is worth
can bring customers from airport to downtown and online stores.” The latest half-year picture is more
reassuring, with sales growing by 29% to KRW2.7tn and operating profit at KRW155bn (excluding its operations at Busan and Gimhae Airports), spurred on by the decreased rent payments at Incheon.
Daigou drives sales in H1 Lotte has been filling the void left by the store closures with an aggressive domestic marketing campaign, conducted downtown and online, to lure customers. The firm launched a high profile
‘Yum’ brand advertising initiative in June and a three-day beauty event in partnership with L’Oréal Travel Retail Asia Pacific in August at its main store. As a result of the activation, duty
free sales downtown and online spiked by 44% and 50%, respectively. The opening of stores at Incheon
International Airport’s Terminal 2 (see below) will also have had an impact on sales. In January, Lotte Duty Free unveiled eight stores over a total
pointing out however that Lotte’s H1 results will appear flattering, given its loss of KRW29.7bn ($26.1m) in the second quarter of last year due to THAAD – its first loss since the outbreak of SARS 14 years ago. Overall, Lotte’s Bo-joon called the
result ‘pretty satisfying’. “Sales growth for H1 at home is
heavily driven by Chinese shuttle traders or daigou. Foreign customers from Southeast Asia such as Taiwan, Hong Kong, Vietnam, Indonesia and Malaysia were crucial as well.” Similar to its steadfast marketing
efforts on home soil, lotte is also diversifying its business to attract greater volumes of tourists from Southeast Asia. This extends to participation in
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global conferences, inviting social media influencers to events in South Korea and collaborating with banks in Thailand. Indeed, Lotte has made no
secret of its plans to propel forward its international business, both at airports and downtown, especially in Vietnam’s Ho Chi Minh City and Hanoi. In 2017, overseas sales grew by 45% to KRW140bn in 2017.
In H1 2018, the return was even healthier, up 60% to KRW97bn, with this figure tipped to reach KRW200bn by year-end. Currently, it operates seven
overseas locations, including at Kansai International Airport, Toyko Ginza downtown, Guam Antonio B. Won Pat International Airport, Jakarta downtown, Bangkok downtown; and in Vietnam at Da Nang Airport and Nha Trang Cam Ranh Airport.
Sales growth +70% in Tokyo According to Bo-joon, Tokyo Ginza recorded sales growth of +72% year-on-year, while its two airport stores in Vietnam are on the way to achieving a surplus this year. “[The] operation in Japan is
certainly onwards and upwards,” he comments. “We have been struggling with businesses in Indonesia and Bangkok, but we will find [a] breakthrough. “It has only been less than two
years since Lotte Duty Free started its operation in Vietnam, so the very first step is, of course, to stabilise the business,” comments Bo-joon. Significantly in August, it
announced a move to acquire the JR/Duty Free business in Australia and New Zealand (see panel on previous page]. “[The] Cooperation with
JR/Duty Free is an important strategic milestone for Lotte Duty Free’s international expansion because we finally get to run businesses outside Asia. “Starting with the acquisition,
Lotte Duty Free aims to become the number one travel retailer in the Oceania market within five years.” The new foray outside Asia,
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Contact:
janice@trbusiness.com More than 130 brands feature at the Incheon T2 concessions. 20 TOP 10 OPERATORS
growth in its overseas business and a more stable domestic situation has Lotte in good spirits in H2. “We are quite optimistic about
sales for H2 that will likely recover to pre-crisis levels,” says Bo-joon. “Operating profit will certainly be
higher than that of last year thanks to the partial withdrawal from Incheon. “However, it will not likely reach
the levels pre-Thaad, since our domestic business has been heavily reliant on daigou and it will take a little bit more time for our foreign
OCTOBER 2018
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