Shilla Duty Free experienced a 27% sales growth to $2.4bn in 2014 and it is looking for sustained revenue growth from its South Korean operations this year.

Speaking exclusively with TRBusiness in Seoul recently, Jason Cha, Senior Executive, Vice President & Head of Duty Free Business at Shilla Duty Free also revealed that the retailer is planning to bid for one of the two new downtown duty free retail licenses being offered by the Korea Customs Service (KCS) in Seoul later this year.

KCS is also separately offering a downtown license in Jeju and another in Seoul that only SME companies may bid for. The closing date for all these downtown offers is 1 June 2015.

“We have decided on a location for a new downtown duty free store if we win,” says Cha. “The size of the new store will be almost the same as our Seoul flagship. We will make it according to the same concept, so it’s easy to see from the street. We expect competition for the new downtown store concessions to be tough.”

 

SHILLA SALES TURNOVER GROWING FAST

Meanwhile, Chinese customers visiting Seoul continue to drive the majority of Shilla’s business at both its downtown and airport stores: “We are happy with revenue growth; it’s not a small number,” say Cha.

 

“We just follow the market. Still the major Chinese portion is group tours as there still are first time visitors, but the re-visit ratio is growing.”

As extensively reported by TRBusiness, Shilla won three new five-year duty free concessions that are set to begin on 1 September at Incheon International Airport, where it already operates.

 

It has also continued to expand overseas, most recently partnering with DFASS Group, while hiring former Nuance CEO, Roberto Graziani to its board to lead the company’s overseas business expansion drive.

Cha said Shilla is ‘happy’ with its performance to date. Sales revenue at the Seoul downtown store grew by 38% to reach almost 40% of Shilla Duty Free’s total South Korean sales in 2014.

By contrast, Korean passengers accounted for 42% of all purchases at Shilla Duty Free’s Incheon Airport shops – just slightly ahead of the 41% share held by Chinese customers last year.

 

ONLINE SALES UP BY 39% LAST YEAR

Purchases online also rose by 39% to reach about 8% of the company’s total sales in 2014, following the launch of Shilla’s Chinese language website in May last year, with South Koreans accounting for 70% of purchases and Chinese the balance.

Construction within the retailer’s downtown store on Jeju island is also nearing completion after a major two-year renovation and expansion, with boutique openings for Chanel, Gucci and Hermès set to be completed by the middle of this year.

“Business in Jeju is very strong,” says Cha. “Sales growth was 38% last year, the same as in our Seoul downtown shop. This year we forecast more sales growth in our Jeju shop than in Seoul, as there is no visa restriction for Chinese visitors to Jeju, so there are more Chinese tourists and cruise ships calling.

 

“Group tours are still the biggest portion. They stay in Jeju for two to three days and then visit Seoul.” [This will be helped by the fact that there are no longer any visa restrictions for Chinese visitors-Ed].

[A major South Korean review will appear in the May edition of TRBusiness].