The Korea Times close
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Business
  • Tech
  • Bio
  • Companies
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
Entertainment
& Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
Sports
World
  • SCMP
  • Asia
Video
  • Culture
  • People
  • News
Photos
  • Photo News
  • Darkroom
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
  • The Korea Times
  • search
  • Site Map
  • E-paper
  • Subscribe
  • Register
  • LogIn
search close
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
Fri, July 8, 2022 | 01:25
Business
Lotte may fall prey to 'winner's curse'
Posted : 2015-02-13 17:53
Updated : 2015-02-13 21:04
Print Preview
Font Size Up
Font Size Down
People stroll alongside the duty free store zone at Incheon International Airport, Wednesday. Lotte Group has won the rights to have the biggest portion of the zone under its control for the next five years. But its exorbitant bidding price has triggered concerns that the company may fall prey to a 'winner's curse.' / Yonhap
People stroll alongside the duty free store zone at Incheon International Airport, Wednesday. Lotte Group has won the rights to have the biggest portion of the zone under its control for the next five years. But its exorbitant bidding price has triggered concerns that the company may fall prey to a "winner's curse." / Yonhap

By Park Si-soo

Lotte Group's "exorbitant" bid to win the largest amount of duty free space at Incheon International Airport (ICN) is triggering concerns that it may fall victim to a "winner's curse."


The company is expected to benefit from Chinese travelers' lavish spending at domestic airport duty free stores, including those at ICN, the largest airport in Korea.

However, concerns are mounting that Lotte's bidding price was so high that its duty free business at ICN will face difficulties making money.

The two other winners ― Hotel Shilla and Shinsegae Group ― are expected to face similar problems for the same reason.

Experts have expressed concerns that the overheated bidding will end up forcing the companies to sell products at higher prices, passing on the costs to customers.

Lotte will pay a staggering 3.6 trillion won in return for having the rights to run Lotte duty free stores at four out of eight sections at ICN for five years. This means it needs to make 720 billion won annually, nearly 2.5 times higher than the bidding price Lotte paid last time out.

Hotel Shilla has secured the second biggest portion with three sections, paying 1.32 trillion won for five years or 260 billion won annually. Shinsegae Group will have one section, paying 380 billion won for five years or 76 billion won annually.

"It will take one or two years to know whether the bidding conditions were good or bad," a Lotte official said. He said the company will come up with various marketing and promotional plans to maximize its sales at ICN.

Hotel Shilla appears at the biggest disadvantage after the bidding process because it will have less space under the new deal. The company plans to make up for a possible sales drop caused by reduced store size with more active marketing and promotion of highly profitable products such as tobacco and alcoholic beverages.

Many retailers here have been looking to make inroads into the lucrative duty free business to capitalize on the surging number of Chinese and other foreign tourists. Many Koreans that are reluctant to open their wallets often go on a buying spree at duty free shops when traveling overseas.

According to the Korea Tourism Organization (KTO), the number of inbound foreign tourists reached 14 million in 2014, up 16 percent from a year earlier. Of that 14 million, 6.1 million were Chinese, up 40 percent.

Duty free operators here earned a combined 8.3 trillion won in revenue last year, up 21 percent from 2013, thanks largely to visitors from China, according to the customs agency.

The KTO said about 15 million Chinese will visit Korea in 2020, spending a combined 30.5 trillion won here.

Emailpss@koreatimes.co.kr Article ListMore articles by this reporter
 
LG
  • Yoon under fire for nepotism, cronyism allegations
  • World Cultural Industry Forum highlights Sweden's impact on K-pop
  • IMF chief says 'cannot rule out' possible global recession
  • Just pizza and coffee for Korea's first successful space rocket launch?
  • 'Green stocks are China's next tech stocks'
  • [INTERVIEW] Digitalization key to recovery of travel industry: Yanolja chief
  • Will Korean firms' efforts for World Expo 2030 bear fruit?
  • BGF Retail starts first commercial drone delivery service
  • Fed: Sharply higher rates may be needed to quell inflation
  • 3 fishing boats catch fire at Jeju port, 1 person rescued
  • 'Extraordinary Attorney Woo' to be adapted into webtoon 'Extraordinary Attorney Woo' to be adapted into webtoon
  • [INTERVIEW] 'Money Heist: Korea' writer feels satisfied to expand series' franchise [INTERVIEW] 'Money Heist: Korea' writer feels satisfied to expand series' franchise
  • BLACKPINK to drop new album in August BLACKPINK to drop new album in August
  • Maroon 5 removes Rising Sun Flag on homepage amid controversy Maroon 5 removes Rising Sun Flag on homepage amid controversy
  • aespa calls for action on sustainable development goals aespa calls for action on sustainable development goals
DARKROOM
  • Afghanistan earthquake killed more than 1,000

    Afghanistan earthquake killed more than 1,000

  • Divided America reacts to overturn of Roe vs. Wade

    Divided America reacts to overturn of Roe vs. Wade

  • Namaste: Yogis to celebrate International Yoga Day

    Namaste: Yogis to celebrate International Yoga Day

  • Poor hit harder by economic crisis

    Poor hit harder by economic crisis

  • Roland Garros 2022

    Roland Garros 2022

The Korea Times
CEO & Publisher : Oh Young-jin
Digital News Email : webmaster@koreatimes.co.kr
Tel : 02-724-2114
Online newspaper registration No : 서울,아52844
Date of registration : 2020.02.05
Masthead : The Korea Times
Copyright © koreatimes.co.kr. All rights reserved.
  • About Us
  • Introduction
  • History
  • Location
  • Media Kit
  • Contact Us
  • Products & Service
  • Subscribe
  • E-paper
  • Mobile Service
  • RSS Service
  • Content Sales
  • Policy
  • Privacy Statement
  • Terms of Service
  • 고충처리인
  • Youth Protection Policy
  • Code of Ethics
  • Copyright Policy
  • Family Site
  • Hankook Ilbo
  • Dongwha Group