Lotte, Shilla, Shinsegae, and Hyundai Department Store All Likely to Participate in Bidding
No Rent Burden and Increased Japanese Travel Positively Expand Business Size
As the selection process for a new operator in the liquor and tobacco sector at Gimpo Airport Duty-Free Shop begins, all four major duty-free operators are expected to participate in the bidding. There is no reason to pass up a business location that promises stable sales amid a challenging duty-free environment.
According to the duty-free industry on the 28th, the four major duty-free shops?Lotte Duty Free, Shilla Duty Free, Shinsegae Duty Free, and Hyundai Department Store Duty Free?are expected to participate in the bidding for the duty-free shop on the 3rd floor of the Gimpo Airport departure hall. Shilla Duty Free, which has operated the duty-free zone for five years since 2018 and whose operating rights expire in April next year, will also reapply.
On the 22nd, ahead of the Christmas holiday, travelers heading to the provinces are checking in or heading to the boarding gates at the domestic terminal of Gimpo Airport. Photo by Heo Younghan younghan@
The bidding target area this time is the DF2 zone where liquor and tobacco can be sold, with a total area of 733.4㎡ (222 pyeong). The total lease period is seven years, and the annual sales of the zone are estimated at 41.9 billion KRW. Korea Airports Corporation plans to receive proposals until January 15 next year and select the operator through an open competitive bidding process.
The main reason duty-free shops show great interest in the Gimpo Airport DF2 zone bidding is that it is not a loss-making business. The rent calculation method consists of a basic rent (300 million KRW) plus sales-linked rent, so if sales decrease in a given year, the rent paid is less than the previous year. From the duty-free operator’s perspective, there is no burden of paying a fixed rent, which is predetermined. Therefore, the deciding factor in the bidding results is how high the operating rate offered is. The minimum operating rate is 30%.
The large number of travelers using Gimpo Airport to go to Japan also increases the attractiveness of this zone. A duty-free industry official said, “There is high demand for traveling to Japan via Gimpo Airport, and because there are many people, the business can quickly settle when started,” adding, “Unlike Incheon Airport, the business site is not large, so the operational burden is also low.” According to Korea Airports Corporation, the number of international passengers using Gimpo Airport until October this year was 2.57 million. In 2019, before COVID-19, 4.26 million passengers used the airport, and considering this, the number of people visiting Gimpo Airport is expected to increase.
Within the duty-free industry, it is expected that Lotte Duty Free will aggressively participate in this bidding. Since it withdrew from Incheon Airport Duty-Free and only operates downtown duty-free shops, securing a new sales channel is considered urgent. In particular, liquor and tobacco generally have profit margins about 10 percentage points higher than cosmetics and perfumes, and since liquor and tobacco sales are not significant in downtown duty-free shops, it is analyzed that Lotte Duty Free will actively enter this bidding.
Some argue that it may not be easy for Lotte Duty Free to be selected since it has been selling perfumes and cosmetics in the DF1 zone since 2022 (5 years + 5 years). There is concern that if one operator monopolizes both DF1 and DF2 operating rights, decision-making authority could become concentrated. However, Korea Airports Corporation does not have a clause prohibiting duplicate bidding, unlike in the past, so it is expected that this will not significantly affect the bidding.
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