Lotte Duty Free exits Incheon Airport Terminal 1 contracts, sets its sights on Vietnam
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Lotte Duty Free exits its contentious Incheon International Airport Terminal 1 cosmetics, fashion and leathergoods contracts, to be replaced by Shinsegae Duty Free.
As reported, South Korea’s duty free giant served notice on 13 February of its intention to quit three contracts – DF1 (P&C), DF5 (leathergoods & fashion) and DF8 (miscellaneous categories).
The company cited “the burden of rent increases” following the sharp downturn in Chinese tourists in 2017 amid the THAAD dispute with China.
The three concessions, later consolidated into two by Incheon International Airport Corporation, were subsequently awarded to Shinsegae Duty Free, which commences business on 1 August. Lotte Duty Free will continue to operate its DF3 liquor, tobacco and foods business at T1 until 2020.
Lotte Duty Free said that it expects to save about 1.4 trillion won (US$1.25 billion) in rent by 2020 through its premature exit. “Based on improved profitability through the withdrawal from Incheon Airport, the company intends to strengthen its competitiveness in downtown duty free shops and to expand online duty free shop marketing,” it said.
“In addition, in order to revitalise sales of our [T1] liquor and cigarettes stores, we plan to analyse outbound passengers and target enhanced marketing through improved linkage with city and online duty free shops.”
Lotte said that it also aims to boost downtown and online sales of cosmetics and fashion to avoid losing custom to its Incheon successor. A customer prepaid card for Lotte’s vacated T1 business can now be used downtown.
Lotte Duty Free plans to concentrate its efforts on expanding business overseas, with Vietnam the key focus. As reported, the company celebrated the grand opening of its Da Nang International Airport concession on 1 November last year, after a soft opening in May. The business, registered as Phu Khanh Duty Free, is a 60/40 joint venture between Lotte Duty Free and a local partner.
In June this year Lotte Duty Free opened arrivals and departures stores at Cam Ranh International Airport in Nha Trang, after being awarded an exclusive ten-year duty free concession.
Lotte said that it also plans to invest heavily in additional downtown stores in Hanoi, Ho Chi Minh City and Da Nang.
Questions & Answers
Q.Which product categories did Lotte Duty Free exit at Incheon Airport Terminal 1?
Which product categories did Lotte Duty Free exit at Incheon Airport Terminal 1?
Lotte Duty Free exited contracts for cosmetics, fashion, leathergoods, and miscellaneous categories. These were initially three concessions, later consolidated into two, which Shinsegae Duty Free will now operate.
Q.Why did Lotte Duty Free decide to leave its contracts at Incheon Airport Terminal 1 early?
Why did Lotte Duty Free decide to leave its contracts at Incheon Airport Terminal 1 early?
The company cited the burden of rent increases following a sharp downturn in Chinese tourists in 2017, due to the THAAD dispute with China. This made the concessions less profitable.
Q.How much in rent does Lotte Duty Free expect to save by leaving Incheon Airport Terminal 1 prematurely?
How much in rent does Lotte Duty Free expect to save by leaving Incheon Airport Terminal 1 prematurely?
Lotte Duty Free anticipates saving approximately 1.4 trillion won, which is equivalent to US$1.25 billion, in rent by 2020 through this early departure from the Terminal 1 contracts.
Q.What are Lotte Duty Free's key expansion plans in Vietnam?
What are Lotte Duty Free's key expansion plans in Vietnam?
Lotte Duty Free plans to invest heavily in additional downtown stores in Hanoi, Ho Chi Minh City, and Da Nang. It also opened concessions at Da Nang International Airport and Cam Ranh International Airport.