Shinsegae closes duty-free at Gimhae airportShinsegae Chosun Hotel is to close its duty-free store at Gimhae International Airport in Busan following local media reports that it is losing 30 billion won ($25.3 million) annually.
Shinsegae won a bid to operate a duty-free business at the airport in 2013 and started operations in 2014.
The company said it has received approval from the Korea Airports Corporation to end its contract. It is expected to pull out of the airport early next year after the Korean Customs Service reviews the process.
Shinsegae said it plans to relocate the business to Shinsegae Department Store’s Centum City branch in central Busan, and expand its duty-free store from the current 6,940 square meters (74,477 square feet) to 8,600 square meters.
“We will focus mainly on the new store from now on,” said Shinsegae Chosun Hotel CEO Sung Young-mok. “The company plans to improve the structure of the nation’s duty-free industry in general.”
The Korea Customs Service controls the duty-free industry in Korea. Each operator’s license is subject to a public bid every five years. Shinsegae would have to pay a penalty for pulling out before the end of the contract.
Some business insiders say the company chose to move out because of costs. Shinsegae paid 64.1 billion won a year for rent, which is 14 billion won more than previous license-holder Lotte paid. One media outlet reported that the company’s annual losses accounted for 30 billion won.
Business insiders say the company wanted the duty-free store at the airport to promote its name, but changed its mind after it recently won a bid to operate a duty-free shop in central Seoul.
The duty-free industry is enjoying double-digit sales growth thanks to Chinese tourists. According to Korea Customs Service data released earlier this year, Korea’s duty-free market was worth 8 trillion won last year, compared to 4.8 trillion won in 2010.
Shinsegae duty-free stores’ total revenue was 16.6 billion won last year, according to customs.
BY KIM YOUNG-NAM [firstname.lastname@example.org]
More in Industry
Beef for the Year of the Ox
Real estate reaches the 21st century with the 'proptech' boom
Companies count on crafting customized cosmetics for consumers