Market Conditions in China Remain Unchanged, Duty-Free Shops Seek Breakthrough in Second Half
Incheon Airport Renovation, Online Alcohol Sales, Overseas Business, etc.
The duty-free industry is determined to make a fresh start in the second half of this year. Despite the transition to an endemic phase (periodic outbreaks of infectious diseases), the Chinese market, which accounts for a high sales dependency, is underperforming expectations. Additionally, starting July 1, the 10-year operator of Incheon International Airport, known as the "gateway to Korea," has changed, and the long-blocked online sales of duty-free liquor have begun. Each company plans to put all efforts into improving their performance in the second half of the year in their own ways.
Models are promoting the 'Online Liquor Specialty Store' opened by Lotte Internet Duty Free at Lotte Duty Free. [Photo by Lotte Duty Free].
Lotte Duty Free Emphasizes 'Lotte Duty Free Zone Bigger Than the Airport'
According to the duty-free industry on the 3rd, Lotte Duty Free, which ceased its duty-free business at Incheon Airport after 22 years last month, plans to focus all efforts on securing customers for downtown duty-free stores and strengthening overseas markets, including the online liquor sales that started this month. Lotte Duty Free will launch the 'Lotte Duty Free Zone Bigger Than the Airport' campaign in earnest. The strategy is to raise awareness of downtown duty-free stores and internet duty-free channels, which are cheaper and more convenient than airport duty-free stores.
Lotte Duty Free has secured over 700 liquor products from more than 100 brands, including popular whiskies that are globally scarce, as well as wine, cognac, and brandy?the largest volume in the domestic duty-free industry. This includes differentiated products such as the limited edition Glenfiddich 29-year-old 'Yozakura.' Lotte Duty Free operates four liquor specialty halls categorized by whiskey, wine & champagne, brandy & cognac, and spirits, as well as four whiskey halls featuring best-selling products like Johnnie Walker, Ballantine’s, Royal Salute, and Glenfiddich. They also plan to enhance price attractiveness by offering up to 30% discounts on popular liquors recommended by their MDs. Until September 30, a raffle event for a five-continent world travel package will be held for all customers purchasing at downtown stores and internet duty-free stores.
Starting from the 7th, downtown duty-free stores will gradually normalize their business hours to 8 p.m., beginning with the Myeongdong Main Store and World Tower Store. From July 1, all downtown stores will offer up to KRW 1.11 million in LDF Pay rewards, and until July 30, customers who purchase over USD 300 at downtown stores will receive raffle tickets for prizes including airline tickets to Australia and Japan and accommodation vouchers for Lotte Hotel Jeju. Customer participation events such as fan meetings and invitation parties with Lotte Duty Free models are also planned for the second half of the year.
They will also intensify efforts to expand their influence in overseas markets. Currently, they operate 15 stores in six countries including Australia, Japan, Singapore, Vietnam, Thailand, and New Zealand, including the Melbourne Airport store that opened last month. Lotte Duty Free, whose overseas store sales grew 500% year-on-year in the first quarter, plans to secure additional growth engines through the grand opening of the Singapore Changi Airport store by the end of the year and the scheduled opening of the Hanoi downtown store in Vietnam as early as the second half of this year.
To commemorate the opening of Shilla Duty Free Incheon Airport branch, Kim Tae-ho, Head of TR Division at Hotel Shilla (fifth from the right), Han Young-doo, Manager of Shilla Duty Free Incheon Airport branch (third from the right), and other executives and employees are posing for a commemorative photo. [Photo by Shilla Duty Free].
Shilla and Shinsegae Duty Free Open 'New 10 Years of Endemic Incheon Airport'
The operators who won the Incheon Airport duty-free business rights are focusing on the 'new 10 years of endemic Incheon Airport' in the second half of this year. Shilla Duty Free will showcase about 400 diverse brands in a 8,907㎡ (approximately 2,700 pyeong) store space at Incheon International Airport Terminal 1 and Terminal 2 (T1, T2). About half of the entire store opened temporarily on the 1st. Shilla Duty Free sells perfume and cosmetics brands such as Chanel, Dior, Est?e Lauder, and Sulwhasoo, as well as luxury fashion brands including Herm?s, Chanel, Gucci, and Saint Laurent. They plan to hold a 'grand opening' next year through additional store renovations, including duplex stores.
While focusing on stabilizing the Incheon Airport store, Shilla Duty Free is also concentrating on attracting the MZ generation (Millennials + Gen Z) by revitalizing the online duty-free store. The 'Cafela' opened earlier this year at Shilla Duty Free Seoul Store has gained popularity for its cozy interior, and they are considering creating similar rest spaces. A Shilla Duty Free official said, "Since the operator change and store opening schedule are progressing rapidly, our priority is to stabilize the Incheon Airport store first. Afterwards, we will focus on activating new services such as liquor smart order, 'LaViewON,' and 'Shilla Trip' to make it a duty-free store preferred by younger customers."
At Shinsegae Duty Free Incheon Airport Terminal 2, Yang Hojin, Head of Sales at Shinsegae DF (ninth from the right), is taking a commemorative photo with the first purchasing customer's family and others. [Photo by Shinsegae DF].
Shinsegae Duty Free operates 29 stores across a total of 9,907㎡ in Terminals 1 and 2. This month, they are initially operating 22 stores over 4,185㎡, selling about 645 brand products. They plan to open stores sequentially by the end of next year, focusing on brands popular among younger customers. To commemorate the opening, on the 1st, they gave commemorative gifts to the first purchaser at Incheon Airport Terminal 1 and Terminal 2, respectively. The gifts were Shinsegae Duty Free’s top-tier Black Membership and KRW 500,000 in duty-free points. Shinsegae Duty Free aims to transform the Incheon Airport duty-free store into a place where travelers can enjoy themselves while waiting, beyond just a shopping space. From the 3rd, they also started online liquor sales. They will exclusively offer both online and offline products such as The Macallan Harmony Collection, The Dalmore Constellation Collection made famous by the movie Kingsman, and Warren Gretzky’s Maple Cask Whiskey.
Experts agree that in the second half of the year, the duty-free industry must simultaneously pursue diversification of product categories to attract a wider range of customers beyond just offline (airport and downtown stores) and online visitors. According to the Korea Duty Free Association, foreigner sales at duty-free stores in May were KRW 938.1 billion, down 29.5% compared to the same period last year. Although the number of foreign visitors reached 510,000, the highest since February 2020 (710,000), this trend continues as sales from Chinese tourists, who have a high per capita spending, and from 'daigou' (overseas purchasing agents) have decreased. Professor Seo Yong-gu of Sookmyung Women’s University’s Department of Business Administration said, "From a product lineup focused on cosmetics and luxury goods targeting Chinese consumers, it is necessary to prepare a new MD considering the increased number of foreign customers from Southeast Asia, Greater China excluding China, and North America, and to consider products suitable for new visitors."
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