The Airport Duty-Free Store Bidding Competition Kicks Off... Gimhae Priority Negotiation Candidate to Be Selected This Week

[Image source=Yonhap News]

[Asia Economy Reporter Yuri Kim] The curtain has officially risen on the successive bidding competitions for airport duty-free shops.

According to the duty-free industry on the 12th, the preferred negotiation candidate for operating the duty-free shop (DF1) at the international departure hall on the 2nd floor of Gimhae International Airport, whose bidding closed on the 8th, will be selected around the 14th. Korea Airports Corporation will evaluate the proposals submitted by the 'Big 3' major duty-free companies?Lotte, Shilla, and Shinsegae Duty Free?that participated in the Gimhae Airport duty-free bidding, then open the bidding operating rates and select the candidate for the license business based on the comprehensive score ranking. The proposal and operating rate reflection ratios are 60% and 40%, respectively. The selected preferred negotiation candidate will apply for the Korea Customs Service license review by the 20th, and the final successful bidder is expected to be confirmed next month.

The Gimhae Airport duty-free shop subject to this bidding covers an area of 991.48㎡ and sells perfumes, cosmetics, and other items excluding liquor and tobacco. The lease period is five years from the license start date. It can be operated for up to 10 years through extension. The expected annual sales amount is 122.7 billion KRW.

Lotte Duty Free, currently operating this area, expressed strong determination to retain it even before the bidding. Shilla Duty Free also showed its bidding intention by forming a related task force (TF). Shinsegae Duty Free participated in the final bidding considering the expansion of market share in the Gyeongnam region.

Despite the ongoing COVID-19 situation causing a heavy burden on additional investments, their participation in the bidding was significantly influenced by the application of a sales-linked rent system. It was considered that even if sales remain sluggish due to the prolonged COVID-19 impact, the cost burden would not be substantial. They also saw the need to calculate the business outlook post-COVID-19. Since the lease period is '5 years + 5 years,' allowing operation for up to 10 years, future value such as the tourism boom after COVID-19 was taken into account. The importance of realizing 'economies of scale' in the duty-free industry was also reflected. The larger the duty-free shop in terms of the number of stores, handled items, and quantities, the greater the 'buying power,' enabling procurement under favorable conditions.

Industry insiders believe that the operating rates submitted by each company will ultimately determine the licensee. This is also expected to have a considerable impact on the bidding for the duty-free shop (DF1) at the 3rd floor departure hall of Gimpo International Airport, which closes on the 26th. Previously, the bidding briefing session for Gimpo Airport duty-free shops attracted great interest, with representatives from the four major duty-free companies?Lotte, Shilla, Shinsegae Duty Free, and Hyundai Department Store Duty Free?all attending. The DF1 subject to bidding covers an area of 732.2㎡ and sells cosmetics, perfumes, and other items. The expected annual sales amount is about 71.4 billion KRW.

An industry official said, "The entire industry believes that the business conditions in the post-COVID era will not be the same as before, and companies have been carefully considering the operating rates until the last moment. However, if even one company bids aggressively, it will affect the Gimpo Airport duty-free shop bidding as well."

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