Silla and Shinsegae Selected as 10-Year Operators of Incheon Airport Duty-Free... Key Issue Is Profitability

Silla and Shinsegae Duty Free Stores Divide DF1 and DF2 Respectively
Remaining DF3, 4, and 5 Operators to Be Selected on the Afternoon of the 27th

On the 22nd, when the number of daily passengers at Incheon Airport exceeded 120,000 for the first time since the COVID-19 pandemic, the duty-free area of Terminal 1 at Incheon Airport was crowded with travelers.
Yeongjongdo - Photo by Jinhyung Kang aymsdream@

Shilla Duty Free and Shinsegae Duty Free have been selected as the 10-year operators for the liquor and cosmetics business zones (DF 1·2) at the departure hall of Incheon International Airport. The small and medium-sized duty-free business zones will be divided between Gyeongbokgung Duty Free and City Plus.

According to the distribution industry on the 27th, the Korea Customs Service held a special license review committee meeting the day before for Incheon Airport duty-free zones DF 1·2 and 7·8, and deliberated and approved new license applications including these details.

In zones DF1·2, duty-free shops can sell representative products such as perfume, cosmetics, liquor, and tobacco. As industry experts predicted, Hotel Shilla will take charge of zone DF1, and Shinsegae DF will manage zone DF2. Zones DF1·2 have large sales volumes and high expectations for profitability, making the competition for business rights the fiercest.

In this operator selection, the rent calculation method changed from a 'fixed rent' to a 'passenger-linked' system. This method charges rent linked to the number of passengers, which is more favorable for securing profitability compared to the past fixed rent system. However, since an increase in passenger numbers does not guarantee an increase in duty-free visitors, it is analyzed that the situation needs to be monitored going forward. A duty-free shop official who won the business rights said, "Based on the 35 million departing passengers in 2019 before COVID-19, the annual rent is around 850 billion KRW at the highest rate," adding, "It is about 15% cheaper than before, so securing profits should not be difficult." For zones DF8·9, where small and medium-sized enterprises can sell all items, Gyeongbokgung Duty Free (DF8 zone) and City Plus (DF9 zone) were selected respectively.

Earlier, Incheon International Airport Corporation reviewed general duty-free operators among five companies including domestic duty-free shops such as Lotte, Shilla, Shinsegae, Hyundai Department Store Duty Free, and the Chinese state-owned duty-free group (CDFG), selecting Shilla, Shinsegae, and Hyundai as candidate operators and notifying the Korea Customs Service. The candidates for small and medium-sized business rights were narrowed down to two companies: Gyeongbokgung Duty Free and City Plus. Considering that overlapping awards within the same group are not allowed, it was expected that each company would take one zone within their group. Zones DF1·2 and DF8·9 are grouped by the same group respectively. Participating companies in the review unanimously agreed to "improve practices such as excessive discounts and payment of passenger referral fees."

Meanwhile, the operators for zones DF3·4, which handle fashion, accessories, and boutiques, and zone DF5, which handles boutiques only, will also be finalized in the afternoon. The industry expects that Shinsegae DF and Hotel Shilla will each take one zone in DF3·4 without surprises. In this case, according to the regulation that a company can win up to two zones, zone DF5 will go to Hyundai Department Store Duty Free.

The newly selected operators will operate the Incheon Airport departure hall duty-free shops for 10 years starting from July.

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