HDC Shilla, Hanwha win duty-free bids

HDC Shilla Duty Free Shop and Hanwha Galleria Time World ended victorious in the fierce battle to win business licenses to run large-scale duty-free shops in downtown Seoul. 

With their hard-won golden ticket, the two retail giants expect to boost their yearly sales by trillions of won.

In 2014, duty-free stores in Seoul posted combined sales of 4.4 trillion won ($3.9 billion), which accounted for more than half of the country’s 8.3 trillion won duty-free market.

As small operators, SM Duty Free and the Jeju Tourism Organization were chosen for Seoul and Jejudo Island, respectively.

The Korea Customs Service announced the four winners Friday afternoon based on their management capacity, financial soundness, infrastructure, contribution to society and the tourism industry and their support for small and mid-sized companies, according to officials.

An evaluation committee consisting of members of academia, civic groups and the customs office gave a five-minute presentation with a follow-up question-and-answer session at the Incheon International Airport’s training institute Friday.

The selection was made among 24 candidates in total ― three in downtown Seoul and one on Jejudo Island.

Others participating in the bid included major retail groups such as Lotte Duty Free, Hyundai Department Store, Shinsegae DF and E-Land, as well as conglomerate SK Group.

To the retail industry hit hard by the Middle East respiratory syndrome breakout last month, the selection of new duty-free shops was the single largest variable to ginger up business and attract foreign, especially Chinese, tourists once again.

In the case of Hotel Shilla, it achieved 2.6 trillion won ($2.3 billion) in sales and 150 billion won in operating profits last year with its duty-free business ― a figure expected to leap by bounds with the incoming downtown shop.

“You are to take credit for the success, I will take responsibility for (any) failure,” Hotel Shilla CEO Lee Boo-jin was quoted as saying to the employees before the final presentation.

Reflecting such strong needs, bidders had poured out a series of ideas on how they may contribute to the nation’s tourism industry, all deeming themselves the best option.

Hyundai DF pledged to donate 12 percent of its operating profits from a new duty-free shop to tourism infrastructure.

Shinsegae, which planned to renovate its 85-year-old landmark department store in Namdaemun into a duty-free outlet, also said it would build a fountain in the area, so as to attract more travelers.

Upon the news, the stock price of Hanwha Galleria Time World hit the ceiling Friday, jumping 30 percent from the previous day to 78,000 won. Hotel Shilla, too, rose 8.94 percent from the previous day.

The selected winners are required to open their stores within six months and their licenses will be valid for five years, according to a revised customs regulation cutting the conventional 10 years in half.

By Bae Hyun-jung (tellme@heraldcorp.com)