Duty Free Business in Crisis
As the Chinese government has banned Chinese tour groups from visiting South Korea as part of retaliation over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) missile system, Lotte Duty Free, which is struggling with sales decreases in South Korea, is also struggling with business in other countries.
According to industry sources, Lotte Duty Free closed down the store in the Jakarta International Airport after an unsuccessful bid to extend the contract.on the first overseas store.
Accordingly, the company will have difficulties in achieving its goal to increase the share of sales of overseas stores to 40 percent in the total by 2018.
Lotte Duty Free posted 92.7 billion won (US$82.55 million) in sales overseas last year, accounting for 1.5 percent of the total. With the withdrawal from the Jakarta International Airport, overseas sales are expected to decrease, leading to the fall in the share as well. The sales in the Jakarta International Airport last year stood at 18.4 billion won (US$16.38 million).
Lotte Duty Free opened the duty free store in the Jakarta International Airport in 2012, becoming the first domestic company to open the store in other countries. The company announced its plan to make 40 percent of the total sales in other countries by 2018 while expanding overseas business. Unlike the ambitious plan, Lotte Duty Free is seeing its sales performance sluggish in other countries now and is expected to have difficulties in attaining the goal as it is even hard to extend contracts as shown in Indonesia.
Meanwhile, Lotte Duty Free is planning to focus on securing stores in other Southeast Asian regions, including Thailand. An official from Lotte Duty Free said, “The store in the Jakarta International Airport was acquired by local company in the process of rebidding. But, we are still seeking to secure the license of overseas duty free business in other countries.”