HDC-Shilla, Hanwha Galleria struggles to draw shoppers

Absence of luxury goods brands, inconvenient locations cited as disadvantages

By Lee Hyo-sik

Hanwha Galleria and HDC-Shilla, which opened duty free stores in Seoul late last month, have been struggling to attract Chinese and other foreign shoppers because of the absence of popular foreign luxury brands, among others.

The location of newly-opened stores, away from tourist sites in downtown Seoul, are also said to have made them less attractive to foreign visitors, many of whom choose to go to other shops located in the city center.

Hanwha and HDC-Shilla say it will take some time to get their operations on track, stressing that Chinese and other tourists will flock to their shops once they begin offering high-end bags and other luxury items. They are also trying to expand business ties with travel agencies catering to foreigners who visit Korea in group.

However, many industry analysts say that it would take longer than expected for newly-opened duty free shops to normalize their operations.

“Hanwha Galleria and HDC-Shilla are having a difficulty in negotiating with Louis Vuitton, Chanel and other luxury goods makers,” said a duty free market analyst, who declined to be named. “The duty free stores are desperate to attract these premium brands. But the brands have shown a lukewarm attitude toward opening shops at Hanwha and HDC-Shilla because they can sell all their goods at existing shops. They just don’t want to spend money to run new shops.”

The analyst then said attracting Chinese who come here in group is the key to the success of domestic duty free shops.

“Given that many travel agencies have long been doing business with existing duty free stores, it is not easy for newly-opened shops to break the entry barrier. Eventually, Hanwha and HDC-Shilla can do so but it will take some time,” he said.

Citing the locations of the newly-opened stores, the analyst said many shoppers would rather go to those located in the downtown area.

“Hanwha Galleria store is in Yeouido, which is a largely financial industry district. The HDC-Shilla store is at I’Park mall in Yongsan where no attractive tourist spots are located. Given their geographical disadvantages, they really have to attract group tourists by boosting cooperation with tour agencies.”

Despite a fewer number of shoppers than previously expected, Hanwha Galleria, which expects to generate 500 billion won in sales this year, said the number will soon increase when foreign luxury brands open shops.

“It’s been only 10 days since the shop opened. We are still in its infant stage,” a Hanwha Galleria spokesman said. “So it is too early to say whether our store is a success or not. We decided not to make public how many shoppers we attract and how much money we make for the time being. Doing so is just meaningless at the moment.”

The spokesman then expressed confidence that the Hanwha Galleria store will become one of the most visited duty free shops in Seoul, stressing that the company will draw more group tourists and offer a wide range of consumer products that Chinese and other foreign visitors seek to purchase in Korea.

HDC-Shilla echoed Hanwha’s views, saying that business conditions will soon improve.

“Our store just opened and it is not the time to say whether it is a success or not,” We don’t have major luxury goods brands yet. But we expect them to soon set up their shops inside our store. We are also working hard to draw as many Chinese travelers as possible, who come here in group.”

HDC-Shilla expects to earn 1 trillion won in revenue in 2016.

Can Hana Tour fare better?

Hana Tour, Korea’s largest travel agency is set to open its first duty free store later this month at its headquarters building in Insa-dong, downtown Seoul. About 200 brands have expressed interests in opening a shop inside the store, according to the company

The SM Duty Free store will mostly deal with a wide range of goods produced by local companies. But it also plans to have one or two foreign luxury brand shops in order to draw more Chinese and other foreign tourists.

It is location near the Insa-Dong Street, one of the most visited tourist destinations in Seoul, has put the SM Duty Free in a better position to draw more foreign tourists, Hana Tour said.

“We will open the store late this month when 200 brand shops are ready to welcome shoppers,” a Hana Tour official said. “We will deal with mostly locally-produced consumer goods but we also plans to gradually expand product categories by introducing some foreign luxury goods. The store location will also enable us to invite more Chinese tourists than other duty free shops.”