Korea. Moyonge Jung, senior retail and business analyst at Mooie Davitt, wrote that the Korean conglomerate has announced in a regulatory filing that Doosan will close its Doota duty-free city. District business.
The group will return its license from April 30, 2020 and stop operating in Dongdaemun, east of Seoul.
The company said in a statement: “We plan to improve our financial position by closing the tax-free business, which will suffer from low profit margins in the long run.”
The upcoming closure is the second time that South Korea’s Hanwha Group has withdrawn from its South Korean city centre market after deciding to close its loss-free duty-free Galleria Duty Free 63 in September.
According to reports, the Doota Duty Free Shop opened in May 2016 with great fanfare. However, due to the THAAD anti-missile system dispute between China and South Korea and the fierce competition in the urban tax-free market (and the subsequent escalation), the Chinese tourism industry has lost the commission cost of the Gully Group. Huge financial pressure.
After the implementation of the new e-commerce law in China on January 1, people expressed concern about the future of the purchasing business, which may also be a factor in the decision.
Once the cheap golden goose is considered a Korean company, the once-coveted tax-free license is no longer impressive.
With the growing competition between the top three retailers (Lotte Duty Free, Shilla Duty Free, New World Duty Free), and ambitious new players (modern duty free shops) are committed to expanding market share for those who can’t For the rival companies, the promise of future wealth has become increasingly rampant. The strength of the giant.
A Doota duty-free representative explained that the medium- and long-term profitability of the tax-free business is expected to decline, which prompted this decision.
Despite this, Doosan’s decision to withdraw from the business surprised industry observers as the company was seen as the only retailer to gain market share and improve profitability beyond the Big Three.
Doota Duty Free has achieved strong stock growth and a successful turnaround in 2018 profits by catering to the convenience of the purchaser, who found the store close to The Shilla Duty Free and Lotte Duty Free. Doota Duty Free Shop sales increased by +53.7% year-on-year to 618.1 billion won ($687.8 million) in 2018. During the same period, its market share increased from 3% to 3.3%.
The spokesman said that with the Lotte Duty Free Shop and the Shilla Duty Free Shop not only expanding their footprints in Korea but also abroad, the Doota Duty Free Shop has only one store in downtown Seoul and sees too many growth barriers.
Despite the increase in sales, it is expected that operating profit will be lost again in 2019, and three additional licenses will be tendered before the end of the year. The Doota Duty Free board of directors is clearly certain. Since Doosan is mainly engaged in heavy industry and construction, the duty-free business only accounts for 2.23% of the total revenue of Korean companies.
The Duta Duty Free Shop decided to withdraw and return the permit to the Korea Customs Administration. This means that only 10 of the 13 licenses issued by the regulator can continue to operate (exit the city duty-free shop Shinchon, Hanwha) Times World Yeoido and Doota Duty Free Shop Dongdaemun). It remains to be seen when the Korea Customs Administration will bid for Doota duty-free licenses.