Lotte, SK desperate to win back duty free stores in Seoul

By Jhoo Dong-chan

Lotte and SK Networks’ race for the right to operate duty free stores in Seoul is intensifying as the deadline for bid proposals is just around the corner.

According to industry sources, Sunday, the Korea Customs Service will receive bid proposals for duty free store operation rights until Oct. 4. The two companies, which failed to renew their contracts with the government agency last year, are desperate to win back their operation rights.

The Lotte Duty Free Store at Lotte World Tower in Jamsil, southern Seoul, was the nation’s third-largest duty free store with annual sales of over 600 billion won ($533 million), stocking major luxury brands, including Chanel, Louis Vuitton and Hermes.

However, it failed to renew its contract last year, and closed its doors in June.

Industry insiders say that the nation’s largest duty free business operator is likely to win back the operation rights this time, but possible hurdles include various scandals over Lotte Group’s alleged irregularities, such as creating slush funds and lobbying government officials.

SK Networks, which had operated Walkerhill Duty Free for more than 20 years in eastern Seoul, had sales of around 300 billion won and invested 100 billion won on renovations last year.

However, it also failed to renew its contract with the government agency last year, halting operations in May.

In a bid to win back the operation rights, SK Networks Chairman Chey Shin-won promised to provide full support on winning a bid this year.

Other retail giants Hyundai Department Store and Shinsegae’s bids are also expected to be a challenge for the two companies.

Hyundai Department Store, which failed at last year’s bidding, once again rose to the challenge with its stable capital power. As of the end of last year, Hyundai Department Store’s debt ratio is only 52.8 percent, a contrast to its rival Lotte Department Store’s 138.1 percent and Shinsegae Department Store’s 95 percent.

Its cashable assets marked 64.1 billion won as of the first quarter this year, and are expected to reach 700 billion won by early 2017.

Another strong contender is Shinsegae, which has already won the bid last year, showing intention of trying for another duty free store in Seoul.

Shinsegae Vice Chairman Chung Yong-jin said in June that he is interested in having another duty free store in Seoul, and it has “a strong chance of winning the bid.”