Hotel Shilla Emerged as Duty Free Powerhouse at Three Major Airports in Asia

Hotel Shilla has become an oligopolistic duty free cosmetics shop at the Incheon International Airport.

Hotel Shilla has become an oligopolistic duty free cosmetics shop at the Incheon International Airport after the opening of its second terminal. Earlier in April this year, it became the sole duty free cosmetics shop at the Hong Kong International Airport.

According to industry sources, Hotel Shilla’s current position as the sole duty free cosmetics shop at the Singapore Changi Airport and its monopolistic and oligopolistic positions in Hong Kong and South Korea to become effective next year will boost its bargaining power to a significant extent in the category of cosmetics and perfumes.

Still, Hotel Shilla’s current business performance is below expectations. In the first quarter of this year, the company’s sales, operating profit and current net income totaled 1.0211 trillion won (US$910 million), 10 billion won (US$9.0 million) and 2.7 billion won (US$2.4 million), respectively. Although the sales showed an increase of 14.9%, the operating profit and current net income fell 48.2% and 7.6%. According to Mirae Asset research analyst Ham Seung-hee, the figures for the following quarter are estimated at 934.6 billion won (US$841 million), 15.7 billion won (US$14 million) and 1.6 billion won (US$1.4 million), down 2%, 16% and 42.9% from a year earlier.

“Airport duty free shops are quite similar to online retail stores in that they are not based on regular customers and their competitiveness hinges on product marketing capabilities,” the analyst mentioned, adding, “Those shops tend to generate less profits in their early stage.”