‘Lotte Duty Free mulls advancing into overseas markets next year’

‘Lotte Duty Free mulls advancing into overseas markets next year’. December. 27, 2016 07:20. by Lee Sae Saem iamsam@donga.com. “In the duty free shop industry, competition is unfolding not just in the Asia region but the global market as whole. We need to found a solution of what the most desirable system is to ensure stable growth and development of the duty free industry.”

Lotte Duty Free’s World Tower branch has won license again on Dec. 17 in a competitive public bid slightly over six months after having its operation suspended. The Lotte World Tower branch is stepping up preparations to resume sales operation within this year.

In a written interview with The Dong-A Ilbo on Monday, Jang Seon-wook (58), CEO of Lotte Duty Free, said, “We are expanding our shop to 17,000 sq. meters now from 11,400 sq. meters licensed,” adding, “The number of brands housed in the duty free will also increase to over 700 from 500.”

“In addition to stabilizing the Lotte World Tower branch’s operation, we will focus on overseas business in 2017,” the CEO said. “We are considering advancing into new overseas markets including duty free stores in Thailand and Japan next year.” The CEO said Lotte Duty Free is considering merger and acquisition of overseas duty free businesses.

“Duty free shops had been considered ‘lucrative cash cow business,’ but it is difficult to make success without know-how in operation or adequate investment," Jang said. "Some duty free stores are excessively dependent on commission fees to attract customers, but this is a problem that could led to deterioration of the reputation of the Korean duty free industry as a whole.”

Laws and institutions regarding duty free business fluctuated over the past several years. Bids to issue licenses for new duty free stores have been offered three times during a matter of two years. As soon as the law, which was revised in 2012, took effect last year, another revision bill to the law was submitted at the National Assembly. “Laws and regulations on duty free shop business needs urgent improvement,” the Lotte Duty Free CEO said. “I understand some argue that all issues, including the current duty free license system, need to be reconsidered from square one.”

On the criticism that "providing additional license to Lotte Duty Free, a monopolistic duty free shop service provider, dampens fairness," which repeatedly emerges in the course of license review, Jang said, “Duty free shops are an export industry. Lotte Duty Free ranks No. 3 in the world with a 6.4 percent share of the market, and only controls a 16.7 percent market share in Asia. The company should not be considered a monopolistic player.”

Lotte has overcome a major crisis, but has yet to overcome additional bumps including inspection by the Korea Customs Service and an investigation by an independent counsel that is probing the Choi Soon-sil gate.

“We expect that the matter will be addressed in a fair and transparent manner in line with the procedure and rules,” Jang said. “We will focus on our capabilities to strengthening the competitiveness of Korea’s tourism sector and to contributing economic development through successful operation of the Lotte World Tower branch.”