KCS licenses nine to run duty free shops

By Doug Newhouse |

The Korea Customs Service (KCS) has awarded duty free licenses for nine companies to run duty free shops in major cities outside Seoul, Busan and Jeju.
According to a report in the Korea Herald this month, KCS has approved the licenses for the retailers to rebalance the current heavy weighting of downtown duty free shops based in Seoul run by bigger retailers, including Lotte, Shilla (right) and others who are excluded from running these new businesses.
Companies/retailers selected to enter the downtown duty free business for the very first time in their respective cities include the Grand Tourist Hotel in Daegu, Hotel Encore in Suwon, Daedong Department Store in Changwon, Rocket Electric in Suncheon, Seohee Construction in Gyeongju, plus the Incheon Songdo Duty Free Shop, which is expected to be operated by a joint venture between Incheon Development and Tourism Corporation, plus two private retail firms. Other license holders include Seohee Construction,
The awards follow the dictate by the Korean Government at the end of 2012 that small to medium-sized newcomers should be the recipients of any new downtown duty free licenses and not the giants. At the same time it said that all of these companies must allocate 40% of all retail space to Korean goods – in addition to foreign-owned brands.
A total of 27 companies applied for the licensees, according to the Korea Herald and all of the successful applicants will now receive ‘guidance’ from the KCS on how to run their logistics to the satisfaction of customs’ requirements.
Meanwhile, the giants – principally Lotte and Shilla – dominate both the airport and downtown store landscapes in South Korea, with Shilla Duty Free (The Shilla) and Lotte accounting for 85% of total sales in 2011 (+25%) to $4.5bn. When the final sales count is in that number will easily exceed $5bn, with Korea retaining its crown as the biggest DF&TR market in the world.
Based on very upbeat passenger traffic forecasts, local industry analysts are now forecasting that the Korean duty free travel retail business will continue to grow to become a $6.5bn business in 2015. This is largely based on the forecast that the number of Chinese travellers to Korea will reach 4m in 2015, while Japanese visitor numbers are predicted to remain steady at 3m.

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