HDC Shilla Duty Free and Hanwha Galleria Timeworld, which are affiliated with the country’s major conglomerates Samsung and Hanwha, last week obtained licenses to run new duty-free stores in downtown Seoul.
They had good reason to be overjoyed at their success in the high-profile bidding war against five competitors. The duty-free market has been a rare bright spot in the local retail sector struggling with anemic consumer spending amid a sluggish economy.
Buoyed mainly by shopping by a growing number of foreign tourists, especially Chinese visitors, the duty-free market here grew by double digits annually to 8.3 trillion won ($7.3 billion) in 2014 from 4.5 trillion won in 2010. Sales at seven duty-free stores run by four companies in Seoul amounted to 4.4 trillion won last year.
HDC Shilla Duty Free, a joint venture between Hotel Shilla, which belongs to Samsung Group, and Hyundai Development Co., plans to develop what it calls the world’s biggest downtown duty-free complex in Yongsan, a railway hub surrounded by tourist spots. Hanwha Galleria Timeworld has proposed to locate its duty-free store in its landmark 63 Building, which was once the country’s tallest structure.
Along with them, two smaller retailers were selected to operate two other new duty-free stores in Seoul and the resort island of Jeju, respectively.
Granting the licenses, the first of their kind in 15 years, is expected to help boost investment and create more jobs. Shilla and Hanwha have pledged to contribute to reinvigorating the tourism industry and the economy through their new businesses.
But the opening of their duty-free stores in addition to the 43 existing ones across the country is certain to worsen the conditions of many discount stores and traditional markets, which are struggling with slow growth or declines in sales.
It is time to consider whether it is wise to continue to give the benefits from duty-free sales to a handful of large corporations. Foreign tourists spent about 20 trillion won during their stay here last year and nearly 30 percent of that amount was earned by the dozens of duty-free stores run by large companies.
Thousands of small shops across the country have been designated as places that refund value-added tax to foreign customers. But foreign travelers have done little shopping at those shops as they are supposed to receive the refunded cash on their departure at an airport. This inconvenient system should be scrapped to help small retailers gain more benefits from duty-free sales.
