Incheon Airport Duty-Free Store Bid D-30... Intensifying Game of Wits

Over the past year, the number of passengers using Incheon International Airport exceeded 70 million for the first time since its opening in 2001, setting a new annual passenger record. According to Incheon International Airport Corporation, the total number of passengers using Incheon Airport in 2019 was approximately 71.169 million, an increase of about 4.3% compared to the previous year. The photo shows the duty-free area at Incheon Airport on the 9th. / Yeongjongdo = Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Seungjin Lee] The bidding for the Incheon Airport Duty-Free Zone 8, with annual sales reaching 1.2 trillion KRW, is just one month away. This bidding is expected to be more intense than ever due to new variables such as the participation of the latecomer Hyundai Department Store and the introduction of integrated business rights.

On the 17th, Incheon International Airport Corporation announced the "4th Incheon Airport Duty-Free Store Bidding." The bidding targets a total of eight business rights: five for large corporations and three for small and medium-sized enterprises. Among these, the business rights allocated to large corporations include one in Terminal 1 (T1) West Zone DF2 (perfume and cosmetics), two in DF3 and DF4 (liquor and tobacco), and two in East Zone DF6 and West Zone DF7 (leather and fashion), totaling five. Currently, among the five large corporation zones, DF2, DF4, and DF6 are operated by Shilla Duty Free, DF3 by Lotte Duty Free, and DF7 by Shinsegae Duty Free.

A new variable in this bidding is the integrated business rights. DF3 and DF6 are combined with the boarding area for bidding, which is interpreted as an attempt to attract bidders' interest by bundling the relatively lower-sales boarding area. Among the DF1 boarding area stores, liquor, tobacco, and food stores will be transferred to the DF3 operator after Shinsegae's duty-free business rights expire in August 2023, while fashion and other stores will be transferred to the DF6 operator.

Another variable is whether Hyundai Department Store will participate in the bidding. According to the duty-free industry on the 27th, about ten companies participated in the business briefing session for the Terminal 1 (T1) duty-free business zone bidding held on the 22nd at the Incheon International Airport Corporation building in Jung-gu, Incheon. Large corporations included Shilla, Lotte, Shinsegae, and Hyundai Department Store duty-free shops, while small and medium-sized enterprises included City, Entas, SM, Grand, and Busan Duty Free.

Participation in the business briefing does not necessarily lead to bidding participation. However, since it is an opportunity to hear detailed explanations about the bidding and gauge competitors' atmospheres, attending the briefing can be seen as a sign of strong interest in the bidding.

Within the industry, it is viewed that Hyundai Department Store will likely try to secure the Incheon Airport duty-free business rights following the two downtown duty-free stores it currently holds, as increasing the number of stores to enhance buying power is an urgent priority for expanding its business. On the other hand, some believe that Hyundai Department Store's recent rapid expansion in the duty-free business makes aggressive bidding this time unlikely.

Ultimately, no one can predict the outcome until the bidding results are revealed. The more intense the strategic maneuvering, the higher the winning bid may be, potentially causing a "winner's curse." Accordingly, the industry has cautiously stated that all parties will "carefully consider business feasibility and deliberate participation until the last moment."

Meanwhile, the registration deadline for this Incheon Airport duty-free bidding is February 26, with the final operator selected on the 27th. The corporation will select one preferred negotiator per business right, which will then be reviewed by the Korea Customs Service, with the final operator expected to be decided around April. Companies awarded the business rights can operate for up to 10 years, including the initial 5-year basic contract period, provided they meet evaluation criteria.