MOODIE DAVITT SNAPSHOT: LOTTE DUTY FREE IN 2018

• Korean sales up 25% to over KW7.5 trillion (US$6.7 billion), all-time 38-year high;
• Boom in daigou trade offset soft traditional Chinese tourism market;
• Myeong-dong flagship revenue +35% to over KW4 trillion (US$3.6 billion);
• World Tower sales soar 80% to over KW1 trillion (US$895.4 million);
• Online sales +50% to KW2 trillion (US$1.8 billion) last year. Now worth 25% of total revenue compared to 8% in 2013;
• Heavy downtown store investment paying off.

Source: The Moodie Davitt Report

SOUTH KOREA. Lotte Duty Free posted all-time record sales of more than KW7.5 trillion (US$6.7 billion) at its Korean stores last year, the company revealed last night.

Sales rose 25% year-on-year to the highest level in the travel retailer’s 38-year history.

Sales at Lotte Duty Free’s flagship store in Myeong-dong, Seoul exceeded KW4 trillion (US$3.6 billion), a landmark reached on 14 December. That all-time high represented an approximate 35% increase year-on-year.

Lotte Duty Free World Tower posted sales of more than KW1 trillion (US$895.4 million), joining what the retailer dubbed the “One Trillion Club” on 23 December.

That represents an 80% increase year-on-year for the Jamsil, Seoul store, which reopened on 5 January 2017, 193 days after it was forced to close on 26 June 2016 due to the loss of its licence in an open tender.

Higher and higher: South Korea’s busiest duty free door, Lotte Duty Free’s Myeong-dong, Seoul downtown store, generated record sales of over US$3.6 billion last year.

Lotte Duty Free World Tower joined the “One Trillion Club” on 23 December.

“Even in the midst of rapid market changes, Lotte Duty Free has been able to achieve a record-breaking year, reflecting 38 years of operational expertise,” said newly appointed Lotte Duty Free CEO Lee Kap. “As a leader in the industry, we will endeavour constantly to improve our performance.”

Lotte Duty Free CEO Lee Kap. “A record-breaking performance.”

Lotte Duty Free said that the World Tower store’s excellent tourist services and differentiated luxury brand offer had generated “remarkable achievements” in 2018. This was despite the proliferation of new duty free stores in the Gangnam area [notably the new Shinsegae Duty Free store opened on 18 July -Ed], the retailer commented.

Despite industry difficulties posed by the THAAD dispute between South Korea and China, sales of small and medium enterprise (SME) Korean brands at the World Tower store increased by +300% year-on-year. This contributed to a “win-win relationship” with SMEs, Lotte said.

Increased demand by daigou shoppers “greatly influenced” sales said Lotte. The retailer noted that such travellers had compensated for the “stagnation” of conventional Chinese tourism since the THAAD dispute erupted in March 2017.  [However, Korean travel retail executives and observers are closely monitoring the impact of China’s new e-commerce law, introduced on 1 January 2019, which is expected to hit the daigou business hard -Ed].

Beauty is in the eyes (and shopping bags) of the beholder: Cosmetics sales, notably of high-end international skincare names and a wide array of Korean beauty brands, continued to surge at the Myeong-dong flagship.

Online boom

Lotte Duty Free’s online sales boomed by 50% year-on-year to KW2 trillion (almost US$1.8 billion) in 2018. That represented around 25% of total revenue compared to just 8% in 2013, a more than tripling of share. Lotte attributed the gains to improvements in its online and mobile platforms, allied to successful promotional initiatives.

Online boom: Lotte Duty Free’s multi-lingual e-commerce platform (Chinese shown here) has generated a remarkable tripling of internal market share, to 25%, over the past five years. Online sales boomed by 50% last year to almost US$1.8 billion.

Investment pays off

Lotte Duty Free said that heavy investment in improved facilities had reaped rewards. In August 2016, the Myeong-dong store’s 12th floor was expanded to ease shopping congestion and enhance the offer. In October 2018, Lotte opened a revamped ‘Star Avenue Corner’ on the first floor of the flagship store and ‘Blooming Beauty’, a 519sq m shop-in-shop that houses around 130 brands, 60 of them SME labels and 30 of them independently owned.

“Through this, we are diversifying brands and achieving mutual growth,” Lotte said. In April last year, the company unveiled its KW10 billion (US$9 million) Star Lounge in Myeong-dong for top VIP customers. Invitations to brand events for houses such as Chanel and Swarovski have generated “hot reaction” among customers, the company said.

Star treatment: The Myeong-dong store’s Star Lounge has attracted “hot reaction”.

The story so far

Lotte Duty Free started trading in 1980 at its Myeong-dong store. It has been South Korea’s number one duty free retailer ever since (and the Myeong-dong shop the country’s most popular door). Annual sales reached KW2.2 billion in 1980 (just under US$2 million at today’s exchange rates), rising to KW1 trillion (US$895.4 million) by 2011 when South Korea’s Chinese tourism boom began.

Sales rose to KW2 trillion in 2015, and KW3 trillion in 2016.