SOUTH KOREA. Entas Duty Free and SM Duty Free have been named as preferred bidders for the first arrivals stores at Incheon International Airport. The details have been confirmed through local sources by The Moodie Davitt Report.
As reported, nine retailers tabled offers for the T1 concession (two shops) and T2 contract (one shop), generating a total of 14 bids. Under South Korea’s dual-assessment system, Korea Customs Service (KCS) will evaluate the bids after IIAC’s initial ranking of two companies for each concession.
The bidders must submit a business plan to KCS by 20 March. It is possible for one retailer to be granted both concessions.
How the arrivals contracts are judged IIAC assessed bids on the basis of a 60% weighting for the business (technical) plan and 40% on the financial proposal. Under the country’s controversial two-tier judging system, the corporation’s results are now handed to Korea Customs Service for a final evaluation and choice of winners. The final candidates will then negotiate terms with IIAC before contracts are signed. In a critical change, introduced by Korea Customs Service on 1 February 1, IIAC scoring will count for just 250 of the final 1,000-point rating that will dictate the victors. The move is intended to reduce the emphasis on the financial component of the tender and thus cool what the government agency views as overheated bidding competition. |
Bidders had to offer a minimum guarantee rate (MGR) per category – 21.7% for perfumes & cosmetics; 22.3% for general merchandise; and 26.3% for liquor. Tobacco products are excluded from the arrivals offer.
The bid was open only to small & medium enterprises (SMEs), including, controversially, Dufry Thomas JulKorea Co, operator of one of the two duty free stores at Busan Gimhae International Airport.
As Dufry, the global travel retail giant, is only a minority partner in the joint venture, it still ranks as an SME.
Speaking to The Moodie Davitt Report last week, Executive Director/Concession Development Group Chang-Kyu Kim said: “We think sales will hit around US$100 million in the first full 12 months.” Liquor will be the biggest portion, he predicted, while ginseng products (much favoured by the Chinese) and other packaged foods, plus beauty products will also be popular, he added.
As reported however, many retailers, including Korean Air (theoretically the retailer likely be most impacted by arrivals shops), believe sales will be well below the US$100 million mark.
The absence of tobacco products will be a crucial limitation, most believe, while most Koreans like to exit Incheon International Airport as quickly as possible and are unlikely to stop to shop, some claim.
The target date for start-up of the arrivals shops is the end of May.
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