Korea to allow four new duty-free shops in Seoul

Korea will allow four more duty-free shops to open in Seoul to meet growing demand from Chinese tourists, the government announced Friday. 

“Four new licenses will be issued for operation in Seoul, while the city of Busan and Gangwon Province will also get one each,” Lee Myung-gu, director of the Korea Customs Service, said at a press briefing in Sejong. 

The licensees will be selected by the end of this year through an open competition, the official explained, with one ticket reserved for midsized companies.  

Seoul currently has nine tax-exempt retail outlets. Friday’s decision will raise the total to 13. 

Duty-free stores are a rare bright spot in Korea’s lackluster retail sector, growing by an average 20 percent over the past five years. Last year, they posted a combined 9.2 trillion won ($8 billion) in sales. 

Major retail giants Lotte Duty Free, part of Lotte Group, SK Networks of SK Group and Hyundai Department Store hailed the decision, vowing an all-out effort to win a license. 

For Lotte and SK, in particular, this represents a second chance after they failed to renew the license for shops that they have been running for years. 

“We will make utmost efforts to win the license back,” SK Networks said in a press statement after the announcement. 

SK’s only duty-free outlet inside the Walkerhill Hotel in eastern Seoul faces closure in May with the expiry of its license. 

Lotte, which runs the top duty-free store by sales in Seoul, has to shut its Lotte World Tower outlet in southern Seoul by the end of June. The Lotte World Tower shop ranked third by sales in 2014. 

Hyundai Department Store said it wants to open a tax-free retail outlet at Coex in the southern shopping district of Gangnam.  

The government last year changed its policy on duty-free shops, holding an open competition for operational licenses for the first time. HDC Shilla Duty Free, Hanwha Galleria and SM Duty Free grabbed new licenses to open outlets in Seoul, while Doosan and Shinsegae beat Lotte and SK to win theirs. 

The government, however, has changed its stance again this year, extending the operational licenses of local duty-free stores to 10 years from the current five. Also, the licenses will be automatically renewed to help the companies run their businesses in a more sustainable way. 

The decision to open the field wider for competition is a move in line with the government’s efforts to grow tourism and revive the sluggish domestic economy and create jobs, the KCS explained in a press statement. It expects the new licenses to spur domestic investment of 1 trillion won and 5,000 new jobs. 

Korea is the world’s largest duty-free market, accounting for more than 10 percent of global revenues from duty-free shops. 

In 2014, it saw foreign tourist arrivals rising to a record 14.2 million, greatly helped by a surge in visitors from neighboring China.   

By Lee Sun-young (milaya@heraldcorp.com)