[Report] Gucci as a Guam Specialty? ... Sales Unshaken Despite Typhoon

'Lotte Duty Free' 10 Years Between Guam and Korea
Sales Increased by 40% Last Year Despite Typhoons and High Exchange Rates

Lotte Duty Free Operates 14 Locations in 6 Overseas Countries
"We Will Expand Overseas Sales to Over 1 Trillion Won Annually"

Last month, I visited Antonio B. Won Pat International Airport in Guam. As the afternoon approached, when many flights to major regions including Korea were scheduled to depart, Lotte Duty Free Guam Airport Store was flooded with visitors. The 2,393㎡ (approximately 725 pyeong) store was packed with tourists finishing up their shopping that they couldn't complete during their Guam visit. Guam Airport is designed so that after completing departure procedures, passengers immediately pass through the duty-free store entrance. All departing passengers heading to the boarding gates must stop by the duty-free store. The arch-shaped duty-free store entrance, which passengers encounter right after collecting their luggage post departure procedures, has displayed the Lotte Duty Free sign for the past 10 years.

Visitors to Guam are entering the Lotte Duty Free Guam Airport store. The Lotte Duty Free Guam Airport store is structured so that visitors must pass through it after completing departure procedures to head to the boarding gate, resulting in a high shopping connection for visitors.
[Photo by Kim Yuri]

"From Whiskey to Gucci"... 'Lotte Duty Free' Between Guam and Korea for 10 Years

Lotte Duty Free Guam Airport Store is currently the longest-standing overseas branch among Lotte Duty Free's international operations. Lotte Duty Free entered Guam, a U.S. territory, in 2013, shaking up the Guam duty-free market landscape that was dominated by DFS, the largest U.S. duty-free company at the time. In July last year, the duty-free business license was extended for three years, allowing the operation of the Guam Airport store until July 2026.

Guam Airport Store attracts visitors of various nationalities and is one of the representative overseas branches of Lotte Duty Free that consistently generates stable monthly profits. Despite adverse factors such as the typhoon 'Mawar' damage in May last year and a decline in travel demand due to high exchange rates, sales grew by 40% compared to the previous year, demonstrating resilience. Sales at the Guam Airport store have recovered to about 55% of pre-COVID-19 levels.

Lotte Duty Free Guam Airport Store handles 250 brands including perfumes, cosmetics, fashion and accessories, watches, liquor, and tobacco. Among these, liquor is currently the most purchased item by visitors. Riding the whiskey craze, the sales proportion of whiskey brands such as Ballantine's and Royal Salute surged. Cosmetics, chocolates, and dried mangoes are also among the top-selling products. The luxury brand Gucci accounts for the highest sales proportion. There is even a joke that "Gucci is Guam's specialty product," as it is competitively priced in Guam, attracting many customers. Lee Jae-jun, the store manager of Lotte Duty Free Guam Airport Store, explained, "Even considering the high exchange rate and customs duties upon entry, prices in Guam remain relatively low, so many visitors seek out the Gucci store within Lotte Duty Free."

Lotte Duty Free Guam Airport Store currently employs about 110 staff members, with approximately 70% working as store attendants. Most of them work during the busy afternoon hours. About 70% of customers are Korean. Since the endemic phase (periodic outbreaks of infectious diseases), despite the continued strength of the U.S. dollar and weakness of the Japanese yen, and the shift of domestic low-cost carrier (LCC) routes mainly to Japan, the number of Koreans visiting Guam increased to 371,905 last year. This accounts for 56.7% of the total visitors to Guam (655,970), surpassing half. Compared to the number of Korean visitors before COVID-19 in 2019, it has risen to 49.4%.

Lotte Duty Free Guam Airport Store plans to further recover sales this year. It is counting on the recovery of Japanese tourists, who accounted for only 20% of visitors compared to 2019, and a shift in the strong dollar trend. In particular, it plans to support Guam authorities to prevent tragic incidents like the tourist shooting that occurred earlier this year. Lotte Duty Free Guam Airport Store recently supported 'Crime Stoppers Guam' to enhance the effectiveness of crime prevention. Crime Stoppers is an organization that receives real-time video and crime information and is recognized for playing a crucial role in apprehending suspects. Earlier this month, Lotte Duty Free also donated $8,000 (approximately 10.7 million KRW) to the Guam government to be used for psychological counseling and treatment to help the families of the shooting victims recover from trauma and return to daily life.

Meanwhile, the typhoon damage that swept Guam in May last year has mostly been restored, especially in tourist areas. Carl T.C. Gutierrez, Director of the Guam Visitors Bureau, said, "Because Guam is geopolitically very important, we received a typhoon recovery fund from the U.S. federal government, and major area restorations are already complete." He added, "As individual travelers, mainly Korean tourists, are increasing, not only in the Tumon area but also in southern regions like Inarajan where new seas, grasslands, and jungles can be explored, we will do our utmost to provide a safe and clean environment so visitors can experience the diverse colors of Guam."

Visitors to Guam preparing to depart are shopping at the Lotte Duty Free Guam Airport store. The most popular items among visitors in the 'pre-departure shopping' category are alcoholic beverages. Recently, as whiskey has gained popularity, the whiskey promotion corner has taken a prominent position.
[Photo by Yuri Kim].

Global Duty-Free Environment is Changing... Lotte Duty Free's Strategy

This year, Lotte Duty Free aims to expand its business territory centered on overseas hubs and become a leading global platform in the duty-free industry. Through this, it plans to directly overcome the stagnant domestic duty-free market situation. Lotte Duty Free currently operates 14 stores in 6 overseas countries including Guam, Japan, Vietnam, and Australia. Last year, overseas sales of Lotte Duty Free increased by about 150% compared to the same period the previous year. Lotte Duty Free plans to strengthen its overseas business this year and expand the overseas sales ratio to over 30% within five years.

Preparations have already begun. Even when air routes were blocked due to COVID-19, Lotte Duty Free opened its Danang City Store in November 2022. It is Lotte Duty Free's fourth store in Vietnam and the largest duty-free store in Vietnam. Through scale expansion and strengthening fundamentals, Lotte Duty Free expects to achieve over 60% market share in the Vietnamese duty-free market.

At Melbourne Airport in Australia, Lotte Duty Free will operate under its brand until May 2033, a 10-year period. Lotte Duty Free plans to expand the current 3,592㎡ (approximately 1,090 pyeong) store to 5,634㎡ (approximately 1,704 pyeong) by 2027 and renovate it into a store capable of generating annual sales of 300 billion KRW. Besides Melbourne Airport, Lotte Duty Free operates six stores in the Oceania region, including Brisbane Airport, Darwin Airport, Melbourne City Store, Sydney City Store, and Wellington Airport in New Zealand. Last year, Lotte Duty Free's sales in Oceania rose about 250% compared to the previous year, showing rapid recovery. Lotte Duty Free expects to leverage the newly opened Melbourne Airport store to become the number one duty-free operator in Oceania this year.

At Singapore Changi International Airport, Lotte Duty Free is focusing on a large-scale liquor store. By expanding sales, it aims to strengthen its bargaining power for liquor prices imported into Korea and upgrade competitiveness both domestically and internationally. Lotte Duty Free Changi Airport Store had its grand opening on the 19th, fully operating all 19 stores within 8,700㎡ (approximately 2,632 pyeong). It is the largest among overseas duty-free stores, and Lotte Duty Free exclusively sells liquor and tobacco items at Terminals 1 to 4 in both the arrival and departure halls of Changi Airport. The Changi Airport store began operations in June 2020 but suspended construction due to the prolonged COVID-19 pandemic, resuming store renovations from the fourth quarter of 2021 and gradually expanding operations. Lotte Duty Free expects that if passenger numbers at Changi Airport exceed pre-COVID-19 levels this year, annual sales at this location will reach 500 billion KRW, and plans to raise overseas sales to over 1 trillion KRW annually centered on the Changi Airport store.