Hyundai Development is planning to open a duty-free store, in an attempt to pick up the last slice of one of the very few flourishing industries in Korea.
Company chairman Chung Mong-gyu announced Monday that the company would pour 100 billion won ($92.3 million) into building a shopping complex, including a duty-free store, in Yongsan, Seoul, next to the Yongsan I’Park Mall, which the company already runs.
“We will reserve 40 percent of the space for products from Korean small to midisized companies, and also set up a ‘Korean beauty’ section,” he said.
Hyundai Development Co. chairman Chung Mong-gyu talks to reporters on Monday in Seoul. (Hyundai Development Company)
“The duty-free shop will be part of the global tourism hub we will create in the heart of Seoul. People will be able to enjoy abundant cultural activities and shop at high-end stores with less traffic and great accessibility within Seoul,” he said.
Chung’s business portfolio diversification reflects the dire health of the construction market. In 2013, the company posted 130 billion won in losses. The company’s latest venture into the retail business, the I’Park Mall adjacent to Yongsan Station, barely broke even in 2013.
Hyundai is expected to submit its bid to open a duty-free store once the government opens applications to open four urban duty-free stores by the end of the year.
“Korea’s duty-free industry is marking double-digit growth every year. It was worth 8.5 trillion won in 2014, compared to 3.28 trillion won in 2009, thanks to a foreign tourist influx, mostly Chinese. More than 15 million are expected to visit Korea this year and they will surely enjoy shopping, especially at duty-free stores,” an industry source said.
But Chung is just one of several businessmen looking to take part in the business without prior experience.
While existing members Lotte and Hotel Shilla dominate the market, department moguls Shinsegae and the Galleria have forayed into the urban duty-free store market in the past couple of years.
And companies such as Booyoung, GS Home Shopping, Hana Tour and 27 others who are new to the industry have also announced their plans to participate in the license bid.
“Duty-free is quite a tough business. You need the right know-how and network to make it work, from membership management to allotting luxury brands to attracting the customers and drawing up the right marketing plan. Even though Hyundai has the money, it will take a lot of time and effort to catch up with its competitors.
“The company will have to align with a retailer to make up the gap in the end,” a duty-free store official said on condition of anonymity.
By Bae Ji-sook (email@example.com