Hana Tour partially opens duty-free shop

Industry

Published: 15 Feb. 2016, 20:20

Hana Tour partially opens duty-free shop

SM Duty Free includes a section dedicated to Hallyu, or the Korean Wave, where customers can pretend to be characters in a hit Korean TV show. The first duty-free store run by the country’s No. 1 travel agency Hana Tour partially opened in Insa-dong, one of Seoul’s most visited tourist destinations. [NEWSIS]

Hana Tour, the nation’s No. 1 travel agency and newest duty-free operator, expressed confidence in its first outlet, SM Duty Free, despite tough competition by larger retail competitors and unfavorable market conditions.

The tour agency said Monday that it will be focused on attracting Chinese tourists by bringing in popular cosmetics and baby goods made by local manufacturers.

The operator set an annual sales target of 350 billion won ($290 million) for the store, which partially opened Monday.

Measuring 10,000 square meters (107,639 square feet), the store is housed in the first seven floors of Hana Tour’s headquarters in Insa-dong, central Seoul, a popular tourist destination.

SM Duty Free now houses 490 brands, or 85 percent of its target, including well-known cosmetic brands like Lancome, Estee Lauder and local competitor Sulwhasoo, as well as contemporary labels like Michael Kors and Louis Quatorze. The outlet hopes to be fully stocked by its official opening in April.

But notably absent are top luxury brands such as Louis Vuitton, Hermes and Chanel, known as the “big three” in the duty-free business.

The brands are known for being picky about which stores carry their goods to maintain their premium image and typically refrain from selling in new or lesser-known outlets.

Given that the majority of foreign shoppers at duty-free shops are Chinese, who also typically spend big on the three brands, attracting the brands is considered critical for the success of a duty-free outlet.

This is why some observers are painting a gloomy outlook for Hana Tour’s first duty-free shop.

Even though the operator still has two months until its official opening, chances are slim that it will be able to successfully court the luxury brands.

Another negative factor is the declining number of Chinese tourists to Korea, who are heading instead to Japan in record numbers, largely because of favorable exchange rates.

SM Duty Free is also expected to face stiff competition from the duty-free store run by Shinsegae, which will soon open nearby.

To better compete, SM Duty Free plans to leverage the tourists brought in by Hana Tour and to boost its appeal by showcasing products related to K-pop and K-dramas.

“With Hana Tour’s broad network and offices spanning 35 different countries, we will attract customers to SM Duty Free,” said Kwon Hee-seok, head of SM Duty Free.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]