SOUTH KOREA. Lotte Duty Free has introduced plain, unbranded shopping bags at its airport and downtown stores in response to a Chinese backlash against the company in the wake of the THAAD controversy.
As reported, the Chinese authorities have reacted furiously to the South Korean government’s decision to deploy the US anti-missile system as a defence and deterrent against North Korean attacks. China considers the system a threat to its own security and to regional stability.
A China National Travel Administration (CNTA) ban on group travel to South Korea took effect on 15 March, a potentially devastating blow for a country where Chinese make up nearly one in two tourists and generate around 70% of duty free spending.
Korean travel retail giant Lotte Duty Free has felt the brunt of the backlash, due to parent Lotte Group’s agreement to site THAAD on company land. As reported, Lotte Group websites have been attacked and its stores and products subjected to boycotts in China.
Confirming reports of the use of plain white shopping bags, a Lotte Duty Free spokesperson told The Moodie Davitt Report: “There are some customers who feel uncomfortable when arriving in China. So, both at the airport and downtown stores, we are providing customers with plain bags if they request them. The bags were originally in our logistics operations.”
While it is too early to gauge the full impact of the ban, early signs are deeply worrying. Provisional sales to Chinese customers last weekend (18/19 March) at Lotte Duty Free were down -30% year-on-year, meaning an overall -25% hit to the business.
NO INCHEON RENT RELIEF
Incheon International Airport Corporation Deputy Executive Director Bum-ho Kim told The Moodie Davitt Report that Chinese passenger numbers had declined by around -30% since 15 March, though overall traffic for the year is still up thanks to a strong start. Korean and other international passenger numbers continue to grow, helping to offset the Chinese decline, he added.
Kim said it was too early to consider offering rent relief to retailers. Asked if a prolonged Chinese downturn will affect the Incheon International Airport duty free tender, which closes in early April, Kim said: ” No, I think it is a good time for the aggressive bidders to have a ‘reasonable’ anticipation of the future.”
From the airport’s financial perspective certainly, the tender could not be happening at a worse time, right at the beginning of a slump in passenger volumes from a critically important nationality. Bidders will face the invidious task of making sales projections in the context of a political dispute that could be resolved relatively quickly, depending on the May Presidential election result, or might roll on for months or even years [see The Moodie Davitt e-Zine below for further comment on this critical aspect of the THAAD dispute].
At The Shilla Duty Free’s flagship store in Seoul, sales last weekend decreased by around -20% compared with the same period last year, an official told The Moodie Davitt Report. “The group tour restriction has been effective from 15 March and Shilla is carefully observing the aftermath,” he said. “We need more time to clarify the consequences.”
