TOP 10 OPERATORS 2: LOTTE DUTY FREE
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competitive advantages was key to its domestic success in 2018. One way it achieved this was through the creation of a marketing campaign around the word ‘yum’ to drive sales among Korean customers. The retailer viewed the campaign
as a way of sending a positive message to shoppers following its partial withdrawal from Seoul Incheon T1. Another key contributor was well executed promotions through its online store. As far as challenges to its domestic
The official inauguration of Lotte’s Hanoi Nôi Bài Airport was attended by various dignitaries including Kap Lee, CEO, Lotte Duty Free.
“Operating profits are not yet back to pre- THAAD levels as the Chinese group tourists have not returned. Sales volumes, however, have continued to increase.”
Spokesperson, Lotte Duty Free
business were concerned in 2018, the biggest obstacle was the lack of Chinese group tourists, which failed to reach pre-THAAD levels. Tensions with China over the
US-supplied THAAD missile defence system had cooled, but the volume of Chinese tourists, group travellers in particular, had yet to normalise. This has continued into 2019,
Incheon Terminal 1 withdrawal, a Lotte Duty Free Spokesperson told TRBusiness: “Thanks to the withdrawal from Incheon Airport Terminal 1, [we] no longer need to pay sky-high concession fees and [with a] stabilised performance in foreign stores, operating profit for the full-year of 2018 will likely be way higher than last year.” Lotte’s ability to create sustainable
Thriving online business
While Lotte’s airport and downtown domestic and overseas stores continue to drive sales, its online business is also thriving. In the first half of the year, online
sales reached KRW1.4tn ($1.2bn), a 49% increase year-on-year and Lotte is targeting sales of KRW2.9tn come the end of 2019. Should Lotte reach its online growth
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Maria Novella, Barbour, Dr. Martens, Crocs, Joseph & Stacey, Primage and Lucky Chouette. The overall assortment
goal in 2019, this would equate to a year- on-year surge of around +43%. On average, the online shop is
welcoming around 5.4 million monthly active users this year (January to June 2019). It offers around 87,000 products from 1,099 brands, of which 324 are Korean industry exclusive labels. These include Filorga, Eve Lom, Santa
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ranges from typical duty free categories, to unconventional merchandise such as pet supplies, kitchen and dining gadgets, home décor and laundry detergents. Over the last three years,
Lotte’s online sales have grown an average of 32%, which strongly outperforms its offline sales growth of 15%. Assuming the upward trajectory continues, the contribution of online sales to total business will exceed
is said to be interested in omnichannel, we hope our reputation as the world’s leading operator in the online
duty free market will help bring a positive result,” the spokesperson remarks.
OCTOBER 2019
30% in the next five years. The continued success of its online business might also be crucial in trying to secure further overseas concessions. Lotte, for example, which has
submitted a bid for the Changi Airport L&T concession is fully aware of the strong emphasis Singapore Changi places on online, technology and creative solutions. “Since Changi Airport
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with Chinese group tourists yet to return. But according to figures from the Korea Tourism Organisation, the number of Chinese visitors to Korea this July rose 26.5% year-on- year to 519,132. “It is still the same this year and
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it is far from certain when group tourists will return,” a Lotte Duty Free spokesperson tells TRBusiness. “Operating profits are not yet back
to pre-THAAD levels as the Chinese group tourists have not returned.
Sales volumes, however, have continued to increase.”
An unpredictable market However, thankfully any issues regarding the new e-commerce law implemented in China at the start of the year to regulate online merchandising and provide consumers with increased protection, have been addressed; at least for the most part. “The market has reorganised as
large daigou companies, capable of paying taxes have taken over the market,” adds the spokesperson. “This, however, does not mean there are no more risks. “Anything can happen in this
market and nothing is predictable, particularly within the daigou business. This is why it is important to diversify and not rely on it so much.” In terms of the retailer’s overseas
business, this was also extremely successful in 2018. Overseas branches, including Soekarno Hatta International Airport in Jakarta, Indonesia and others in Guam, Japan and Vietnam recorded year-on-year sales growth, of 168%, exceeding the previous year’s total of KRW282bn. The acquisition of JR/Duty Free’s
Australia and New Zealand interests last year proves that the retailer is certainly serious about expanding its overseas footprint.
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