Retailers make all-out effort to win duty-free license

Major South Koreans retailers are making final pushes to win licenses to run duty-free shops in downtown Seoul ahead of the announcement of winners this week.

The retail groups, which are on the hunt for the rare duty-free licenses, are making last-minute pitches on their plans for envisioned stores, including local development and inducement of Chinese tourists in a bid to obtain high scores for the bidding evaluation.

The Korea Customs Service is scheduled to announce the two winners Friday, based on various criteria such as management ability, investment capacity, contribution to the tourism sector, social impact and the capacity to support small and mid-sized enterprises.

Bids have come in from seven retail groups and conglomerates, including Lotte Duty Free, Hyundai Department Store, HDC Shilla, Shinsegae Group and E-Land. Conglomerates SK Group and Hanwha are also in the running.

Hyundai DF, affiliated with the department store chain Hyundai Department Store, is one of the contenders making the move to step up efforts to reinvigorate the region’s economy.

On Monday, Hyundai DF pledged to donate 12 percent of its operating profits from the Seoul duty-free store to be earmarked for tourism infrastructure, including local events and medical tourism promotion during its five-year license contract.

Shinsegae, which plans to renovate its 85-year-old landmark department store in Namdaemun into a duty-free outlet, also said it will refit a fountain in the area into a symbol of Seoul in a bid to develop the Namdaemun and Myeongdong area into a huge travelers’ district.

HDC Shilla, which proposed the country‘s biggest duty-free shop, is making a bold step to lure Chinese tourists, who accounted for about 70 percent of South Korean downtown duty-free spending last year.

On June 29 the CEO of Hotel Shilla, Lee Boo-jin, asked Chinese top executives of state-run travel firms, including CTS and CYTS, to encourage citizens to make the trip to South Korea, during her visits to Beijing and Shanghai.

E-Land is another bidder boasting of its network in China.

E-Land Group signed a memorandum of understanding with Wanda Tourism with its plan to attract 1 million VIP Chinese tourists per year by collaborating with the leading tour agency on its duty-free business.

“Around 70 percent of local duty-free sales come from the Chinese,” said an E-Land official. “As an influential brand in China with over 20 years of Chinese retail experience under our belt, we will expand the size of the local duty-free market.”

The licenses at stake will be valid for five years under a revised customs regulation that shortened the contract period from 10 years. The winning bidders are required to open their respective stores within six months of winning the bid.

By Park Han-na (hnpark@heraldcorp.com)