The heads of South Korea’s retail giants are in a fierce competition to win a license for an urban duty-free store in Seoul in a bid to grab their share of the lucrative industry.
The Korea Customs Service, which manages the bidding, finished accepting bids for the two licenses to operate downtown duty-free stores on Monday.
The list of the companies that announced their jumps into the bidding includes Lotte Duty Free, HDC Shilla, SK Networks, E-Land, Hanwha, Shinsegae Group and a joint venture of Hyundai Department Store and Mode Tour.
Given that the country’s biggest duty-free store in Seoul ― Lotte Duty Free Store’s Sogong-dong branch ― solely posted 4.3 trillion won ($3.8 billion) in sales last year, the bidding is an unmissable opportunity for the large conglomerates.
It is also the first of its kind open to large corporations in 15 years.
As part of efforts to win the coveted licenses, the top executives of the firms are spearheading the bidding war by launching joint ventures with small- and medium-sized firms and announcing location selections, targeting tourist hotspots in the capital, such as Dongdaemun and Namdaemun.
Currently, Lotte Hotel and Hotel Shilla have dominant control over the country’s 8.3 trillion won market. Last year, Lotte Hotel and Hotel Shilla accounted for 83 percent of the country’s duty-free market, 52 percent and 31 percent, respectively.
To settle controversy over its oligopoly, the industry No. 2 player’s Hotel Shilla President Lee Boo-jin teamed up with Hyundai Development Company Chairman Chung Mong-gyu to create the joint venture DHC Shilla Duty Free.
The company said it will open a multiplex mall in a 65,000-square-meter plot that includes the existing I’Park Mall owned by Hyundai Development.
Lotte Duty Free, which already operates three shops out of the six duty-free stores running in Seoul, formed a partnership with a smaller duty-free operator to launch an 11-story shopping venue in Dongdaemun.
Shinsegae vice chairman Chung Yong-jin has been showing strong will to secure the license by reserving Shinsegae department store’s Myeong-dong branch, the country’s first department store, as the location for its duty-free store.
Chung has been expanding the brand’s footing in the industry, acquiring Paradise DFS in 2012 and winning the Incheon International Airport bid earlier this year.
With the full support of Hanwha Group chairman Kim Seung-youn, Hanwha Galleria, a retail unit of the group, said it would set up an urban duty-free store in the landmark Hanwha 63 City building in Yeouido if it wins the business right.
Apparel maker E-Land is also gearing up by striking partnerships with Dufry, the world’s biggest travel retailer, and Wanda Group, China’s biggest tourism company, while Hyundai Department Store has teamed up with travel agency Mode Tour to better cater to Chinese tourists.
The customs office is slated to announce the two winners next month after assessing the applicants.
By Park Han-na (hnpark@heraldcorp.com)
