Annual salary return & store reduction¡¦Duty Free Shop to tighten its belt due to THAAD retalation

[ Park Min Yeong ironlung@ ] | 2017-06-23 11:06:18
The duty-free industry has started emergency management due to the aftermath of the THAAD retaliation measures in China and the deterioration of business environment caused by the saturation of duty free shops in the city. The plan is to prepare employees for long-term crises by releasing part of the salary or reducing the store area.

Lotte Duty Free revealed on June 22 that 40 senior executives and executives submitted a resolution to return 10 percent of their salaries at the Management Strategy Meeting on June21. They are expected to see a decline in sales due to the THAAD troubles by the end of the year. The Lotte Duty Free Shop has decided to open its business strategy meeting every month until the THAAD situation is resolved. So far, the Management Strategy Meeting was held twice in total in the first and second half of the year. In late April and May, Lotte Duty Free`s Chinese sales were down 40%, and overall sales were down about 20% from the same period last year. In the first quarter, this year, Lotte Duty Free`s operating profit (KRW 37.2 billion) fell 73.7% from the same period last year.

Employees in Hanwha Galleria also decided to return a part of the salary and bonuses to the company as the deficit in the duty-free shop increased. In January, executives returned 10% of their salary, and in February, the manager and vice-president returned their 100% bonus. Hanwha Galleria Time World, which is in charge of duty-free business, posted an operating loss of KRW 43.9 billion last year, up 204.9% from the previous year (KRW 14.4 billion). The duty free shop loss business`s operating loss (KRW 12.7 billion) in the first quarter increased 46% from the same period last year.

The size of the store may be reduced and the business hours may be reduced in the case of the market conditions are not good. The Duta Duty Free shop was reopened early this month after renovating the store, reducing the number of sales from nine to seven. The space which it vacated to attract overseas luxury brands was organized and shopping circulation efficiency was improved. The Duta Duty Free shop was originally open until 2 am, but its business hours were shortened to midnight at 11 pm in March. SM Duty Free Shop also reduced the number of sales from six floors to two floors. It has operated from the first floor to the fifth floor, but only the first floor to the fourth floor.

New duty-free shops also asked the Korean government to postpone the renovation. The Korea Duty Free Shop has officially proposed to postpone the opening of a new duty free shop in the Seoul Metropolitan Government in May. The Shinsegae Duty Free Shop and the Hyundai Department Store duty free shop, which passed the patent examination at the end of last year, are expected to start operating this year based on the customs legislation. However they are concerned about the possibility of flying only if the business environment is bad and the door opens at the end of the year. Previously, the KCS said it would push the postponement of the start date if there is a request from a new duty-free shop in April. It is highly likely that the KCS will accept the industry demand.

Meanwhile, According to the Korea Tourism Organization, the number of Chinese tourists (227,811) who visited Korea in April dropped by 66.6 percent from the same period last year. The number of foreign tourists visiting the country decreased by 26.8 percent from the same period last year, and tourism revenues decreased by 28 percent from USD 1 billion. According to the Korea Duty Free Shop, foreign-owned duty-free sales fell for the second consecutive month in April to USD 609.41 million, compared with over USD 8 hundred million in February.

By Park Min Yeong ironlung@


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