South Korean duty free and travel retailer, Lotte Duty Free Group, is targeting a +20% increase in total duty free revenue to reach just over $5bn in 2016 after first half growth of +25%. Driving the big increase have been high-spending Chinese visitors shopping in its stores.
First half sales reached almost $3bn, a senior Lotte Duty Free source said on condition of anonymity. The sales boost comes at a time when the company was preparing to close its Lotte World Tower store in June after failing to renew the shop’s licence.
“Chinese tourist numbers are very strong (and) we are forecasting a +20% increase in total revenue for 2016. Sales have increased a lot (so far) this year because in 2015 we had the MERS epidemic problem,” the source said. “Last year, our total revenue in South Korea was $4.2bn.”
Chinese travellers continue to boost sales.
Sales in the second half of 2016 also got off to a good start with July revenue climbing +45% as the summer peak season got underway, the source noted.
To cope with the closure of the Lotte World Tower store the company has expanded its Sogong downtown flagship unit in central Seoul. The shop has been expanded to occupy four floors in the Lotte Sogong department store building – adding floor 12 to floors nine to 11.
The duty free shop took over the 12th floor in February which has been converted to the new perfume and cosmetics space and opening in June. It replaces the food court that was previously there.
BEAUTY GETS ITS OWN FLOOR
Moving beauty to the 12th floor from the 9th floor has increased the total duty free beauty area by around +35% to 3,500 sq m. In addition, Lotte will use about one third of its 11th floor retail area to display mid-priced South Korean cosmetics brands which are also popular with Chinese visitors.
Space for the South Korean cosmetics brands zone on the 11th floor is being created by moving some fashion brands from this level to the ninth floor area where perfume and cosmetics were located previously. The ninth floor area is being developed as an open display fashion floor and Lotte plans to bring in a number of new South Korean and international fashion brands as well for the first time.
The group has taken over the Seoul Gimpo Airport beauty and general merchandise licence, previously operated by Shilla Duty Free, which was recently retendered by Korea Airports Corporation (KAC).Meanwhile, responding quickly to the loss of its Lotte World Tower store licence, Lotte has recently acquired two new airport duty free licenses, emphasising the company’s intention to retain its leading position in Korea’s DF&TR market.
SME operator City Plus was awarded the Gimpo liquor, tobacco and general merchandise licence, that was previously operated by Lotte, after KAC reserved the concession for SME bidders only.
Elsewhere, Lotte Duty Free has also taken over the Gimhae Airport perfume and cosmetics licence in Busan, after Shinsegae Duty Free decided to give up after losing money and it was retendered.
FIGHTING ON FOR LOTTE WORLD
Meanwhile, Lotte is aiming to reopen its Lotte World Tower store and has set its sights on winning one of four new duty free licenses for downtown shops in Seoul that Korea Customs Service is due to tender towards the end of 2016.
“The 7th floor is being used for the Lotte Internet duty free centre and the customer lounge. As the government recently issued new duty free licenses, we will do our best to acquire a licence to repay the love our customers have shown to us. Thank you.”Following the World Tower closure: Lotte posted the following announcement on its website: “We express our deep thanks to our customers for shopping at Lotte World Tower. Due to the expiry of our duty free shop licence, Lotte World Tower store was closed on 26 June, 2016.
Of the four new downtown duty free shop licenses that KCS will award, three are for large conglomerates and one for SME operators. In addition to Lotte, Shilla Duty Free and Shinsegae Duty Free may make bids even though both companies have already opened new downtown stores in Seoul this year.
Newcomer Hyundae Department Store is another likely bidder, as is WalkerHill Duty Free which had to close its newly-rebuilt downtown store after losing its licence. It is keen to re-open its now empty shop.