Shinsegae, Doosan win in duty-free business war

Shinsegae, Doosan and Lotte each won one of the three expired duty-free licenses in Seoul, the Korea Customs Service said Saturday.

Four conglomerates had engaged in cutthroat competition to get the three expired licenses, two of them at Lotte's duty-free stores in Sogong-dong, downtown Seoul, and Jamsil in southeastern Seoul, and SK's duty-free store at the Sheraton Walkerhill Hotel in eastern Seoul.

After the two-day evaluation of documentation and presentations, the 15-member screening committee raised the hands of Shinsegae and Doosan. It took the license from SK Group, and also took one of the two licenses of Lotte Group, changing the map of this lucrative business in the capital city.

Shinsegae's long experience as a retail giant and Doosan's solid business in Dongdaemun near downtown Seoul seemed to work in their favor, industry sources said. on the other hand, SK's store was considered the least competitive of the six duty-free stores in Seoul, while Lotte might have lost its store because of the ongoing internal battle over the group's issues with management control.

The customs agency unveiled the winners on Saturday night to avoid controversy about the possible tip-off of information and a consequent stir on the stock market, as was the case of a similar announcement in July.

Shinsegae also retained its duty-free license in Busan, the term of which expires by the end of this year. Critics of the government are asking, however, whether it is right to let family-controlled conglomerates continue to practically monopolize the duty-free retail business with annual sales growing to 8.3 trillion-won ($7.2 billion). Lotte takes 47 percent of the market, while Silla Duty-Free, affiliated with the Samsung Group, carves out a 31-percent share. 

This effectively shuts out smaller companies, critics noted. In Japan, by contrast, the government has sharply lowered the threshold to gain a duty-free business, opening its doors to about 20,000 smaller companies and vendors, allowing them to share in the fruits.