The Shilla Duty Free (Shilla) has reported record sales revenue and profit in 2018.

New store openings at Incheon International Airport Terminal 2 and Jeju International Airport, coupled with the stabilisation of overseas branches and customer focused marketing, helped generate sales of $5.3bn last year.

The above figure includes sales from the retailer’s overseas operations in locations such as Singapore Changi, Hong Kong International and Macau International Airport. Combined sales across these operations broke the $1bn barrier for the first time.

LARGEST EVER SALES REVENUE

Kim Tae Ho, Executive Vice President, Hotel Shilla Co Ltd, Travel Retail Business, Korea Division told TRBusiness: “We achieved our largest ever sales revenue last year, while South Korea’s duty free market as a whole grew rapidly by 33% year-on-year.”

This year has been been positive so far for Shilla, despite the introduction of the new Chinese e-commerce law, designed to further regulate the country’s online luxury sales market.

In fact, the year began well for the entire Korean duty free market, with sales rising 20% from January to February 2019 compared to the same period last year (Source: Korea Duty Free Association).

Kim said: “We started with some concerns in January and February as the Chinese government introduced its e-commerce law. We were expecting sales to Chinese customers to slow, but it has not happened yet.”

With Shilla required to renew government licences to operate its flagship Seoul downtown shop and Jeju downtown outlet— its two largest domestic stores — 2019 will be crucial for the company.

“This year, we have to renew our Seoul and Jeju downtown licences, but I’m sure we can acquire these licences,” Kim remarked.

He added: “The Seoul license will be renewed in June and in October we have the Jeju licence renewal. These will be for the second five-year term. Korea Customs Service will evaluate the quality of our services and operational capacity.”

JEJU RENOVATION

Meanwhile, Shilla has been renovating its Jeju downtown store since last year. The total sales area will be expanded by 10% after the renovation and provide a better shopping environment for customers, according to the company.

Kim commented: “We currently use three-and-a-half floors, but are now expanding into the other half of that floor. This means we can invite more brands to that space.”

Small and medium-sized Korean perfume and cosmetics brands, along with Jeju souvenir brands and cosmetics and food items will be placed on the top floor.

“Extra space created on the second and third floors will be given to global brands as they have trouble with the limited space available. We will also widen the customer walkways,” added Kim.

Unsurprisingly, perfume and cosmetics is the largest duty free category at Shilla’s Jeju downtown shop. Korean cosmetics brands comprised the highest share of sales during the past year.

“Chinese men are interested in cosmetics, so cosmetics have more than a 50% share of sales in Jeju,” revealed Kim.

Currently, there is around a 50:50 split between South Korean and international cosmetics brands, but Kim said: “Korean brands are slightly higher, but this could possibly change in 2019 as demand for Korean cosmetics gradually declines.

“We are sorry Korean brand demand is decreasing. We are not sure why, but it does appear to be a trend,” he concluded.