AUSTRALIA. In the relatively short time that he has known the city, Kim Ju-Nam has built a close personal affiliation with the Victorian capital Melbourne.
Spending time here in the run-up to the official inauguration of Lotte Duty Free’s shops this week the leading Korean travel retailer’s CEO has been able to indulge his taste in, and curiosity about, the city’s strong coffee culture. This was introduced via the strong Italian influence here post-World War II and reinforced by the reinvigoration of the Laneways areas, with its European-style cafés, since the 1990s.
So it is more than a soundbite when Kim declares that “I am a coffee lover and Melbourne coffee is among the best in the world”. In his speech to guests at the launch of Lotte Duty Free’s new operations at Melbourne Airport on Thursday, he even joked that “the deep and rich flavours will surely remain in my memory; maybe I’ll be so enamoured that I will not want to return to Korea”.
Melbourne has also proved a popular backdrop for Korean TV dramas, something Kim referenced in his warm remarks to guests about a city he said he would recommend to friends and colleagues for a visit.
That cultural connection is set to run a lot deeper as Lotte Duty Free embarks on its newest airport contract, one for which the retailer has high ambitions.
As reported, the Melbourne Airport duty free business embraces the second-largest retail footprint among Lotte Duty Free’s global airport operations, only behind Singapore Changi Airport.
The retailer plans to expand the footprint from around 3,500sq m to 5,634sq m, with a major enhancement of arrivals next year followed by a +40% space expansion in departures, to be completed by late 2026. Once these investments are complete, the company is targeting KRW300 billion (US$235 million) in annual sales.
Crucially, Lotte Duty Free aims to incorporate the lifestyle and culture (including the coffee culture) of Melbourne into the stores. City landmarks it is taking for design inspiration include Hosier Lane, known as the epicentre of graffiti art in Melbourne, leafy Guildford Lane and the cafés of Degraves Street.
Kim tells The Moodie Davitt Report: “The tourists who come here really seek that specific sense of locality and we plan to increase our offering to match those expectations in this area.”
Asked about the company’s insights into the local customer, Kim says: “We are number one already in terms of our understanding of Korean, Japanese and Chinese customers. We have been operating in Australia already since 2019 [with stores at Brisbane and Darwin airports, plus Melbourne and more recently Sydney downtown -Ed] and have built up our data on the customer, and this complements what we know about the international traveller, built up over a long time.”
Alongside creating Sense of Place, the key to succeeding in Melbourne will lie in engaging a new generation of consumer through up to date concepts that grab their attentions, across channels.
“We want to move away from the buying and selling retail experience and create a new, innovative customer experience. For that purpose we want to combine both online and offline experiences through digital capabilities,” says Kim.
With new or reopened stores in Singapore, Vietnam and Australia, Lotte Duty Free is investing heavily in its overseas infrastructure, with the Pacific a key target region. Kim says that the opening at Melbourne Airport contributes to its global expansion drive and represents “a stepping stone to further expansion”.
On the process that led to the company winning the Melbourne contract, Kim adds: “It was a real honour to compete in this process with the other companies [six in total -Ed]. To win was a vote of confidence in Lotte Duty Free not just an a downtown duty free operator, but also about what we can do at airport stores.
“For our global business expansion we are really going to focus on airport stores, and introduce new innovations and experiences.
“We want to create a differentiated experience that distinguishes Lotte from every other competitor. By doing that we will build on our global expansion success.”
The next key project also falls in Australia, in a location where Lotte Duty Free is an incumbent: Brisbane Airport. Today (14 July) the company makes its bid presentation for that concession, one it holds dear as it seeks to consolidate and grow in Australia.
Kim says: “Brisbane was the first store we opened in Australia. We are operating this very well and we look forward to continuing our role and to build two hubs in Brisbane and Melbourne; we hope to create synergies between the two.”
Korean challenge
In its home market of Korea, like other travel retailers Lotte Duty Free was hit hard by the pandemic and the closure of borders through to 1 April 2022. Since then, outbound travel has picked up though visitor traffic, notably from China, has remained slow to catch up.
Kim says: “It’s true that the reopening of the markets has been a bit slower than we expected. But as we went through the pandemic and then the post-pandemic period, we really came to understand the importance of diversifying the consumer base.
“Previously we had a greater dependence on Chinese consumers and we had the issue of reseller business, but going forward we aim to rely on our ‘pure’ duty free consumers and provide them with the best service.”
Recent lowering of commission rates to resellers has led to lower sales across the board among Korean travel retailers, but improved profitability; Kim sees the period ahead shaping up along these lines.
He says: “The first thing I did when I came into the role as CEO was to commit to reducing the proportion of business going to the reseller business. We have already seen this change and a lower proportion of those sales from resellers and an increase in sales from other channels.”
An opportunity channel on which Lotte Duty Free has long been focused, and on which it will double down, says Kim, is online.
On 1 July, the company opened an online wines & spirits store, following the government’s decision to allow ecommerce duty free liquor sales from that date. This was one of several support policies promoted by the organisation and Korea Customs Service to boost consumer convenience and enhance the competitiveness of the country’s duty free industry
The travel retailer says it has secured the largest array of duty free wines & spirits in the Korean market with some 700 wines & spirits skus from over 100 brands.
Lotte Duty Free operates four online specialty halls for whisk(e)y, wine/Champagne, brandy/Cognac, and other spirits, plus four dedicated whiskey pavilions for Johnnie Walker, Ballantine’s, Royal Salute and Glenfiddich.
Kim says: “I believe the future of duty free will lie in online shopping and Lotte has the most competitive online channel. From 1 July we launched a group of online specialist platforms and the feedback has been very positive so far.
“We continue our efforts to produce an omnichannel offer, where we combine online and offline customer experiences.”
For now, the business will have to rebuild without the influence of Chinese visitors at scale, and Kim repeats his determination to attract new consumers to create balance in the consumer base.
“The recovery will take some time and we continue our efforts to reach out to the Chinese consumers. At the same time we don’t think this will revert to the same levels as pre-pandemic.
“We do want to diversify the base. In light of that we are planning and implementing different measures. Our Family Concert last month had 5,000 international guests attending, and we are hosting many Korean events and performances to regain consumers.”
As we draw to a close, and prepare to move from the store to the Private Jet Terminal to continue the opening event celebration, we ask Kim what his leadership philosophy is. He replies: “I’ve always said that there needs to be a balance between leadership and followership.” What he means is that you need to be able to lead and follow, guide and listen, or “two in one” as he later phrases it. Bring those elements together, he adds, and you can achieve your goals.
We end again by talking about Melbourne, and its significance to the bigger picture of Lotte Duty Free’s aspirations. Kim says that the retailer will place a relentless focus on customer satisfaction, and “try to understand and incorporate the diverse demands and preferences of our customers.”
With Melbourne Airport as a new touchstone and inspiration, he says, the company can push closer to its goal of being “a leading global platform” in the duty free business. ✈
