Following a Hotel Lotte board meeting in Seoul yesterday, Lotte Duty Free has announced that it will not to renew its licence to operate its COEX store in Gangnam, Seoul, once it expires in December of this year as it plots to maximise sales at its remaining stores in Seoul; The Lotte World Tower (Jamsil) and the Myeongdong flagship store.

 

The store, which began operations in 2010 after absorbing the Aekyung Group’s AK Duty Free Shop, will close indefinitely in the second half of the year. In 2017, Lotte successfully renewed the licence to operate the COEX store for a further five years.

 

According to the Korea Duty Free Association (KDFA), the number of domestic duty free shops in the region has fallen from 57 in 2019 (pre-Covid) to now just 48.

 

However, South Korea’s duty free sales have displayed ‘gradual improvements’ during Q1 2022, Kim Tae-Ho, the newly appointed President of KDFA, told TRBusiness in a recent interview.

 

CHINESE DAIGOU TRADE

This follows a 15% increase in duty free revenue to KRW 17.8 trillion/US$14.7 billion in 2021, of which approximately 95% was sales to foreign customers – mostly Chinese daigou shuttle traders.

 

“Although the pandemic has not ended, the demand for international travel is expected to recover which will increase sales of Korean duty free [operators] compared to last year,” commented Kim.

 

“However, I don’t think the sales structure [reliant on Chinese daigou trading] will change radically.”

 

Click here to read more analysis of South Korea’s duty free market on TRBusiness.com.

Click here to read more analysis of South Korea’s duty free market inside the TRBusiness May e-zine.

 

LOTTE WORLD TOWER TO ABSORB COEX CUSTOMERS

Lotte Duty Free said its recent decision to close its COEX store enables it to ‘concentrate its operational capabilities’, by diverting COEX customers to the Lotte World Tower store in Jamsil.

 

It also plans to expand its product and brand offering at both the World Tower and Myeongdong flagship whilst strengthening marketing activities for both.

 

A Lotte Duty Free spokesperson said: “This decision is a special measure, [which enables us] to take another leap forward [as we recover from the pandemic]. We will increase investment so that the Lotte World Tower store can absorb customers of the COEX store and improve the surrounding tourism infrastructure.”

 

Lotte highlights that South Korea’s duty free industry continues to struggle as competition in an already over-crowded marketplace has intensified in recent years with the emergence of new companies.

 

Combined with the damaging impacts of the pandemic and the consequential travel restrictions, Lotte also points to the fact that not one retailer has applied for a downtown duty free licence prior to the deadline closing on 30 May.