SEOUL: Incheon Airport’s three new Small and Medium Enterprise (SME) duty free concession holders are understood to have experienced difficulties with plans to invite major luxury brands to supply their new shops that open today (1 September).
The South Korean flagship airport’s 12 new five-year licenses begin today, replacing the airport’s previous concession licensing system. As a result, some SME operators’ new shops are expected to open without the full selection of international brand merchandise that has already been approved in their business plans submitted to Incheon International Airport Corporation (IIAC).
According to local sources, South Korea’s MERS outbreak at the end of May has played a major role in delaying SME operators’ negotiations with leading luxury brands, while the principals assess the impact of the fall in foreign visitor numbers on their Korean market sales plans.
The MERS crisis also caused delays in negotiations between luxury brands and some other new duty free concession holders at Incheon Airport for the same reasons.
“We will start with everything on September 1. Other operators fell behind schedule because there are many things to do,” a Lotte Duty Free source told TRBusiness.
“Incheon International Airport Corporation has confirmed everything regarding operators’ plans, but it depends on the brands and the configuration the shops have planned.”
Another issue to have emerged is some top-tier brands’ reluctance to work with certain new SME operators who they feel are too inexperienced and lack the necessary resources to handle and manage their brands in the required manner.
Competition for concessions at Incheon has been tough in the latest round of bidding and particularly with the difficulties and disruption caused in the country by the MERS health scare.
“SME companies have no experience of airport retail operations. It’s difficult for them to invite major brands,” the source said. “Chanel disclosed they are not going to enter SME shops. It’s possible other brands will follow this lead.”
The IIAC has created four new SME duty free concessions to comply with government policy supporting the entry of these smaller companies into the duty free market, which currently is dominated by operators backed by some of South Korea’s leading conglomerates.
The four licenses were tendered earlier this year, along with eight duty free concessions for large companies to operate that were awarded to Lotte Duty Free, Shilla Duty Free and Shinsegae Duty Free.
Three SME companies – Entas Duty Free, City Plus and SME Duty Free were awarded three of the four SME concessions, leaving only the perfume and cosmetics concession DF11 still waiting for award – after three bidding rounds.
