Duty-free rivals face off downtown

Top retail groups are preparing to battle it out for customers at their duty-free outlets in Seoul’s central downtown area, one of the most popular tourist destinations in the country.

Shinsegae Group, which gained an additional duty-free license last year, began construction of a new duty-free shop within the Shinsegae Department Store branch near Namdaemun in Jung District on Monday.

The new store will take up floors eight through 12 of the existing branch and is due to open in May.

Until now, the downtown area has been Lotte Group’s turf, with Lotte Duty Free operating in Lotte Department Store, also located in Jung District.

The two stores are within a 10-minute walk of one another, just 633 meters (0.4 miles) apart.

The Sogong-dong branch of Lotte Duty Free is a cash cow for the group, raking in 1.98 trillion won ($1.64 billion) in annual sales last year because of its prime location near Myeong-dong’s main shopping drag and Lotte’s shrewd marketing to Chinese tourists.

Now, Shinsegae is looking to get in on the action by heavily investing in the new duty-free shop, which will replace the stores of existing brands.

The move will reduce the size of the department store’s operating area by a quarter, but Shinsegae said it will minimize the impact on its brands by making better use of the remaining space.

Some 520 brands will remain, a 14 percent decrease from before construction began.

Shinsegae DF, a Shinsegae unit in charge of operating the group’s duty-free business, said last year that it will invest a total of 270 billion won through 2020 in its duty-free interests.

The investment will mainly go toward attracting tourists and forging partnerships with local merchants, particularly those working in Namdaemun Market in central Seoul.

The traditional market is near Shinsegae Department Store, and Shinsegae wants to develop tourism programs in partnership with the market.

The size of Shinsegae’s investments could increase, as the group announced it would invest a record 4.1 trillion won in 2016, saying the money will be spent on building new shopping complexes, department stores and the new duty-free shop.

Still, Lotte Duty Free is eager to hang on to its position as the top duty-free operator in the area, and has remodeled the duty-free shops that occupy three floors of Lotte Department Store. Construction is also underway to turn the 12th floor, currently a restaurant, into more tax-exempt retail space.

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