SK Networks announces plans for duty-free shop

SK Networks plans to open a duty-free shop at the Cerestar building in Dongdaemun District, central Seoul.

The company that operates the Walkerhill duty-free shop in northeastern Seoul is said to have already signed a contract to use the 10th to 13th floors of the building owned by Pine Tree Asset Management, according to people with knowledge of the matter.

Cerestar is also expected to house both a hotel on the 14th to the 23rd floor and a Hyundai Department Store-operated outlet from the fourth floor below the ground to the ninth floor, making it an efficient one-stop destination for tourists, according to SK Networks.

“We decided that without special focus on Chinese tourists, it would be difficult to win the Seoul duty-free license,” an SK Networks employee said.

The building is in close proximity to Dongdaemun Market, a highly popular traditional Korean shopping area where fashion items from cheap clothing to shoes, accessories and handbags are sold.

SK Networks’ plan indicates its seriousness in contending for one of the much-sought after Seoul duty-free licenses. Other contenders include Lotte, Hyundai Department Store, Shinsegae, Hanwha Galleria and a Shilla-Hyundai Development joint venture.

Three licenses to open and operate duty-free shops in Seoul are scheduled to be issued by the Korea Customs Service in July this year, two of which are expected to be given to conglomerates, and one to a medium-sized firm.

The Korea Customs Service will grade each bid based on the company’s management capability (300 points), supervision capability (250 points), environmental factors that include nearby tourism infrastructure (150 points), the company’s contributions to society and its collaboration with small and medium-sized businesses (150 points).

SK Networks said it plans to brand its duty-free shop as “a small but competitive duty-free shop that caters to Chinese tourists.”

It plans to staff over 90 percent of the store clerks with fluent Chinese speakers, pay special attention to jewelry, watches and local brands that are popular among Chinese, and introduce local designer brands in collaboration with famed stylist Jung Yoon-ki.

SK Networks’ plan follows recent flow of announcements by its competitors of their outlines of duty free shops.

Hyundai Department Store last month came up with plans to open a duty-free shop at its southeastern Seoul branch in Samseong-dong, which is at the center of the so-called MICE (meetings, incentives, conferences and events) tourism complex that the Seoul Metropolitan Government is planning.

Shinsegae Group also recently said it will set up a new company, Shinsegae DF, to strengthen its footing in duty free business. Korea’s No.2 retailer is widely expected to confirm plans for a duty free shop at its central Seoul department store branch, within walking distance from Lotte’s duty free shop and Myeongdong, a shopping district popular with Chinese tourists.

Hanwha Galleria has also issued outlines for a duty-free shop at the 63 Building in Yeoeuido, a 250 meter landmark in Seoul and one of the most popular shopping-to-entertainment arenas in the country, owned by Hanwha Life.

Amid a prolonged slump in domestic consumer demand, retail companies are scrambling to find new sources of profits. The duty free industry, with its double-digit sales growth thanks mainly to Chinese tourists, has sparked retail giants’ interests.

According to Korea Customs Service data, Korea’s duty free market was worth 8 trillion won last year, compared with 4.8 trillion won in 2010.

There are six duty free shops in Seoul, with three operated by Lotte and individual stores run by Hotel Shilla, SK Networks’ Walkerhill and Dongwha.

SK Network’s Walkerhill duty free shop is located next to its hotel franchise (W Hotel, Sheraton Grande Walkerhill) and casino (Paradaise Casino), and has steadily been a popular spot for Chinese tourists.

Around 24 percent of 6.13 million Chinese visitors last year, or 1.45 million Chinese, stopped by Walkerhill duty free shop, according to the company.

BY LEE HYUN-TAEK AND PARK JUNG-YOUN[park.jungyoun@joongang.co.kr]