Second Incheon duty free tender to replace KTO fails
Source: ©The Moodie Report
By Martin Moodie
SOUTH KOREA. A second successive tender for the duty free retail space at Incheon International Airport run by Korea Tourism Organization (KTO) has failed to attract bidders, leaving the situation in limbo.
Under Korean law, IIAC can now award the concession after direct negotiation with other parties. That potentially opens up the contract to travel retail giants Lotte and Shilla, excluded from the recent tenders.
The e-tender closed today. As reported, Incheon International Airport Corporation (IIAC) issued a tender late last year for the concession, which in 2011 generated sales of US$150 million. It split the business into two concessions (DF6 and DF7). Critically, only local companies with assets below KW5 trillion (around US$5 billion) could participate, thus eliminating Korea’s leading travel retail players.
However the tender was aborted after attracting only two participants when it was conducted by electronic bid on 13 December 2012.
Trading as Duty Free Korea, Korea Tourism Organization runs a wide range of luxury, fashion and general merchandise stores at Incheon International Airport
In the initial tender, the contract term ran for two years from 1 March, 2013 to 28 February 2015. To make the proposition more attractive, that was then increased from two to five years, running from June 2013 to May 2018. Another added incentive saw liquor & tobacco, excluded from the earlier bid, added to the mix.
The space was also improved, from 1,223sqm for DF6 and 1,151sq m for DF7 to 1,385sq m and 1338.4s m, respectively. Additional stores were added to DF7.
One seasoned Korean travel retailer told The Moodie Report: “Even with the lowered guarantee and the extended contract term from two to five years, the tenders failed due to the lack of applicants.
“The lower limit concession fee proposed at RFP still seems much higher than any small or mid-sized company can afford and none of them have the experience, the capital resources or the experienced personnel [to run such a business].
“At this moment no one knows whether IIAC will hold one more bid which includes big conglomerates or extend the KTO presence or simply select new tenants without a competition.”
The Moodie Report will be in Seoul next week to discuss this and other issues relating to Korean travel retail for a major forthcoming report on the market.
THE MOODIE REPORT ANNOUNCES SPECIAL KOREAN REPORT
The Moodie Report is pleased to announce a new annual report on South Korean travel retail – the industry’s biggest single market.
Written by The Moodie Report Chairman Martin Moodie, who has been visiting the country each year since 1989, the report will profile all the established and new market players; examine the sector's major challenges and opportunities; and provide on location interviews with airport, downtown and inflight retailers in Incheon, Seoul, Busan and Jeju.
The report will be produced as a dedicated e-Zine, complete with video and audio elements, and also reproduced in hard copy form for the TFWA Asia Pacific show in Singapore this May.