Lotte Duty Free Entering Singapore Focuses on Local Sales Instead of Opening Operations

Scheduled to Start Business in June
Duty-Free Sales at Changi Airport Hindered by Singapore Travel Restrictions
Online Alcohol Sales to Domestic and Foreign Customers First
Positive Discussions on Applying Fast Track in China

[Asia Economy Reporter Cha Min-young] Lotte Duty Free, whose duty-free sales channel within Singapore Changi Airport has been blocked, has chosen a detour strategy called 'online domestic sales.' Until passenger traffic recovers, it plans to sell discounted liquor, for which it won the business rights, to Singaporean locals.

When duty-free sales channels were blocked, turning to online

On the 9th (local time), Lotte Duty Free announced that it would start online liquor sales targeting Singaporean locals. The quantity originally intended for sale at the duty-free shop will be sold at a discount to general consumers after applying customs duties.

Last October, Lotte Duty Free acquired the liquor business operation rights (sales area of 8,519㎡) within Terminals 1 to 4 of Singapore Changi Airport and was scheduled to open the store starting this month. It is Lotte's fifteenth overseas duty-free store and the largest overseas sales site. It is also a large-scale business estimated to generate annual sales of around 500 billion KRW. However, due to the outbreak of the novel coronavirus (COVID-19) at the beginning of the year and issues related to the handover from the existing operator DFS, Lotte found it difficult to proceed with offline operations. They plan to open the online shop first and monitor the situation before deciding the normal opening time for the offline duty-free store.

170,000 daily passengers... down to 800 due to COVID-19

Singapore Changi Airport, ranked 6th worldwide by passenger volume, was hit hard by COVID-19. To prevent the influx of COVID-19, the Singapore government banned all short-term overseas visitors and transit passengers from entering since March 23. As of early June, the daily number of passengers at Changi Airport was reported to be about 100 arrivals and 700 departures. This is a sharp decline compared to the average daily passenger count of over 170,000 in May of the previous year. Changi Airport also reduced rent for duty-free operators by 50% for six months from February 1 to August, and waived rent for some stores in Terminals 2 and 3, where passenger numbers drastically decreased, until April 30.

The fortunate point is that the Singapore government’s passenger lockdown order is showing signs of being lifted. Currently, only foreigners returning via aircraft arranged by their own governments can transit through Changi Airport. As part of the first phase of lockdown easing, Singapore Changi Airport is considering applying a fast-track (shortened quarantine period) for visitors from certain countries such as China and business visitors, reducing their quarantine period. The Singapore Ministry of Foreign Affairs (MFA) and Ministry of Trade and Industry (MTI) jointly announced on the 3rd (local time) that starting from the 8th, they will gradually allow entry only for essential visitors.

Lotte "Expecting lifting of Singapore entry restrictions"

In the duty-free industry, there is speculation that Lotte Duty Free needs a clever strategy to avoid drinking from a poisoned chalice. DFS, the world’s 7th largest duty-free operator that has operated at Changi Airport for over 40 years, voluntarily gave up the opportunity to extend its business rights for two years due to high rent and profitability issues. Only two domestic companies, Lotte Duty Free and Shilla Duty Free, competed in the business rights bidding.

Regarding this, a representative from a major duty-free store said, "Offline operations of general retail stores including duty-free shops are still impossible at Singapore Changi Airport," adding, "Even online duty-free shops require passengers who are actually flying in, which is currently impossible, so it is practically a temporary closure and a very difficult situation."

A Lotte Duty Free official said, "There are currently four terminals within Changi Airport, but two terminals are shut down and only two are operating, so it is practically difficult to operate," adding, "Negotiations are underway regarding the entry of Chinese corporate tourists, so if demand increases in the future, it is seen as positive from the duty-free store’s perspective."

This content was produced with the assistance of AI translation services.