SOUTH KOREA. Incheon International Airport Corporation’s (IIAC) deeply troubled Terminal 2 fashion & accessories tender has failed for an unprecedented sixth time, the airport authority has confirmed to The Moodie Davitt Report.

The DF3 concession covers 14 stores embracing 4,889sq m of retail space (see table). Bidding has been negatively affected by the perceived high cost of entry and the recent collapse in Chinese tourism caused by the THAAD dispute between South Korea and China. Last year the Chinese represented almost 50% of total arrivals and generated around 65% of duty free spending. Chinese arrivals for the first four months of 2017 fell by -25.8% year-on-year with April down by a startling -66.6%.

Shinsegae Duty Free, the country’s third-biggest travel retailer, was the only company to show interest in the latest tender. The IIAC told The Moodie Davitt Report that it is hopeful it can yet reach an agreement with Shinsegae.

Unfashionable fashion: The DF3 contract is proving devilishly difficult to award, leaving Incheon International Airport Corporation with a major headache just months before T2 opens. The other contracts have been awarded as follows: DF1, The Shilla Duty Free; DF2, Lotte Duty Free; DF4 SM; DF5 Entas Duty Free; DF6 CItyPlus

Although the IIAC has retendered the concession with successively reduced minimum annual guarantees, the risks have still been considered too high by the country’s leading travel retailers.

Time is of the essence as T2 is due to open in the final quarter of this year.

Leading fashion and luxury suppliers contacted by The Moodie Davitt Report have variously termed the situation a “total mess with totally unrealistic expectations” and “a fiasco laid bare by the market downturn”. Another said: “This is a salient lesson that retailers cannot, and in this case at least will not, continue to pay unrealistic MAGs.”

However, one leading accessories company said: “It’s not the airport’s fault; they are operating under impossibly over-regulated conditions in a market that’s been ruined by regulation and politics. The government thinks duty free is a golden goose. Well that goose just got strangled.”

Visitor arrival figures by purpose for April underline the startling decline in Chinese tourism; Source: Korea Tourism Organization

Accumulative visitor arrivals by purpose for first four months; Source: Korea Tourism Organization

Fashion (no) show: Time is running out for Incheon International Airport Corporation to fill the contract void.

The rights to operate one of the few Louis Vuitton airport stores in the world (currently only two, soon to be three) is the cherry on the fashion cake. But what happens if the cake collapses?

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