Two South Korean duty-free retailers take off around the world- Nikkei Asian Review

Two South Korean duty-free retailers take off around the world- Nikkei Asian Review

SEOUL/TOKYO -- Two South Korean companies are becoming global duty-free powerhouses. The world of duty-free retail has been dominated by U.S. and European companies, but Lotte Duty Free and Shilla Duty Free are changing this.

Combined, South Korean companies control more than 10% of the global market. Much of this success is thanks to initiatives of the two companies, but credit is also being given to the popularity of South Korean pop culture.




There are two types of duty-free stores. The first are the more familiar shops at airports or other international transport hubs that sell items without customs duties. The other type is the so-called tax-free shop found in cities, at which items are exempt from sales taxes and other duties.

The Boston Consulting Group estimates that the global duty-free goods market was worth $54.2 billion in 2013, up 5% from 2012. It projects that this will reach about $60 billion in 2015, the same size as Japan's entire department store market.

Lotte has 11 duty-free shops at home and abroad and logged sales of 3.5 trillion won ($3.3 billion) in 2013, up 10% from 2012. Lotte is considered among the second tier of such market players, which includes Germany's Heinemann.

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This global push by Lotte and Shilla began in earnest in 2001, when the South Korean government opened up selling space to major distributors for duty-free goods at the newly opened Incheon International Airport. The airport has since become an Asian hub, and this has helped South Korean duty-free retailers.

The two retailers have also moved into Southeast Asia. Lotte has four branches in the region, including in Indonesia and Singapore, while Shilla has a store in Singapore.

Last year, Lotte won the rights to operate a duty-free shop at A.B. Won Pat International Airport in Guam. Lotte said its bidding price and its reputation for attracting customers helped it beat out DFS, the U.S.-based LVMH Moet Hennessy Louis Vuitton subsidiary that is the world's largest duty-free retailer. Lotte's Guam location has the highest sales of all of Lotte's non-South Korean stores.

DFS still has the upper hand in offering luxury brand items. To counter this, the South Korean companies are leveraging the global popularity of South Korean pop culture.

Shilla teamed up with Japanese travel agency JTB to launch a tour package that includes a meet-and-greet with TVXQ!, a South Korean male duo. The tour also comes with a $1,000 coupon that can be used at Shilla's duty-free stores.

Lotte, meanwhile, has signed up with nine South Korean pop idols and groups. The shop has also launched a sales campaign to give away prizes such as 50 grams of gold and cars, which is meant to target Chinese, the largest group of foreign customers.

Lotte Duty Free shops also allow customers to pick up online purchases at the airport, if made at least three hours before departure. This service has proven popular. "Online sales are starting to surpasses those at brick-and-mortar shops," said a Lotte Duty Free official.

The shop plans to offer its site in Japanese this year. It is already available in Korean and Chinese.

News Source : http://asia.nikkei.com/Business/Trends/South-Korean-dutyfree-retailers-boost-presence-in-global-market