Lotte prepares for crucial Incheon RFP ‘in December’

By Charlotte Turner |

Jung-hyun-Kim-Lotte-DF-MD-Marketing-leadIn an exclusive interview, Lotte’s Managing Director for Marketing, Jung-hyun Kim told TRBusiness that he expects a request for proposal (RFP) to be launched by Incheon International Airport in December and considers the tender to be ‘very important’ to Lotte, which already operates liquor & tobacco and packaged food stores with the airport operator.

 

“It’s obviously a very important tender for our company,” said Kim. “But, just like our Lotte Group Chairman Shin Dong-bin says, the business has to be a sustainable operation. He always insists the business must be sustainable.”

 

TRBusiness asked Kim to respond to comments made by DFS about the ‘changing regulations concerning the sale of liquor and tobacco’ and how this – together with other factors – had forced them to withdraw from the business in Singapore; a concession the luxury travel retailer had held since 1980.

 

“We discussed this tender a lot internally because of that issue. But, we have worked out that there will be more pros than cons to having this store, so we decided to participate in the tender.

 

LOOKING FOR A ‘SUSTAINABLE BUSINESS’

“As long as we can see that the profits will materialise, we will always consider it. We are expecting the Incheon RFP to come out in December. So we will carefully examine this and consider it. If we win, we can take advantage of even greater purchasing power.”

 

Jung-hyun-Kim-Lotte-Ian-and-Char

L to R: TRBusiness Editorial Director, Charlotte Turner interviewed Jung-hyun Kim (middle) at Lotte Duty Free’s Seoul HQ earlier this month. He was joined by Seokin (Ian) Park, from Lotte’s Public Relations team.

As reported, Lotte was successful in winning the liquor & tobacco tender at Singapore Changi airport, which was described by Lotte as an ‘electrifying moment for the company’.

 

“The [Changi] tender was aligned with the same strategic direction of the company,” said Kim. “By winning this concession, we think we have demonstrated our business capabilities as a global travel retailer.

 

“We expect that this will have a huge positive influence on our business, including the enhancement of our buying power in liquor and tobacco.

Lotte-Liquor-and-tobacco-store-Incheon-Airport

Lotte’s liquor, tobacco and packaged food store at Incheon International Airport’s Terminal 1.

 

BIG CONCERNS FOR KOREA’S DOWNTOWN DUTY FREE MARKET

“Since we have been running the liquor and tobacco store for Incheon Airport, it will only increase our existing buying power. Changi is the SouthEast Asia hub right? So we are now able to extend our influence in those surrounding areas.”

 

Regarding opportunities for Lotte in downtown Korea, we know that the company decided against bidding for the three new downtown contracts recently announced. Kim told TRBusiness why Lotte had reservations [these comments were made prior to the announcement about Hyundai being the sole bidder for the contracts.]

 

“The market situation changed a lot recently,” said Kim. “So Doota Duty Free pulled out of their business recently and Hanwha Galleria Duty Free also pulled out. There are big concerns which we have about what’s going on.”

Lotte's-main-duty-free-store-is-located-in-Myeongdong,-Seoul

Lotte Duty Free’s main Seoul downtown duty free store is located in Myeongdong.

Kim also said that Lotte is not surprised by what is happening in the downtown duty free market right now.

 

“We expected what is going on with the Korean duty free market at the moment; new players coming in and the old ones pulling out of their businesses.

 

A REORGANISATION OF THE MARKET ‘EXPECTED’

“Within four or five years the whole market will be reorganised. In the 1980s a similar thing actually happened. From the long-term perspective we expect there to be fewer players in this market. However, I remain very confident about Lotte’s future in the market.”

 

TRBusiness understands that part of the problem for newer/smaller operators is their failure to attract all the high-end, international brands which are in such high demand in Korea. However, it is not the sole reason. Of course part of the problem is that there are simply two many companies vying for the same customers, another, which cannot be under played, is the long-term impacts of the THAAD dispute.

 

“The whole Korean duty free market is not making as much profit right now compared to before (two or three years ago),” said Kim. “It’s really hard for everyone to survive right now.

 

“But at Lotte we have those 39 years of operational capabilities, so we can handle the tough situation right now. Other players are really struggling a lot.”

 

Part 2 of this interview will appear on TRBusiness.com shortly.

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