SOUTH KOREA. SM Duty Free has withdrawn its recent bid for the Incheon International Airport Terminal 1 duty free tender. The company initially bid for SME packages DF8 and DF9, and currently runs the five-store DF9 contract. The move means the company will exit its T1 concession when its term expires in August.
With the COVID-19 outbreak sharply affecting passenger traffic and sales, SM Duty Free’s parent company Hana Tour commented that the contract is not financially viable for the company.
As reported, the recent tender attracted a limited number of bidders, with none at all in the large company category for the once-coveted DF2 beauty contract, operated by The Shilla Duty Free.
The impact of COVID-19 on the Korean duty free market is severe. Departures from Incheon International Airport Terminal 1 declined by -47.7% year-on-year in February. Sales at SM Duty Free fell by -52.8% in Terminal 1 and -38.5% in Terminal 2 during the month. With the spread of COVID-19 and travel restrictions against Korea growing, business conditions are likely to deteriorate further.
Although Incheon International Airport Corporation has suggested that airport retailers reduce their hours of operation, the rental fee which is paid out as a fixed sum rather than a percentage of sales makes this difficult.
SM Duty Free has also suspended weekend operations at its downtown duty free store in Insa-dong. Business continues under normal hours during the week while the suspension of sales during the weekend will continue until the end of March.
Although the Korean government has announced a relief package, a decision was made to provide support for just small enterprises. The decision to exclude medium-sized enterprises means that only CityPlus Duty Free and Grand Duty Free are subject to the relief measures announced by the Ministry of Economy and Finance.
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