SEOUL, Nov. 16 (Korea Bizwire) – The duty-free stores that have newly opened in Seoul have seen operating losses this year as heavy marketing costs in the highly competitive market eroded their profitability, their financial documents showed Wednesday.
Five duty-frees stores opened new shops in the capital city after winning licenses in two bids — one in July and the other in November 2015 — in hopes of courting deep-pocketed Chinese customers, but none of them has reached the break-even point since opening.
Shinsegae Duty Free, which opened in mid-May, posted 121.2 billion won (US$103.8 million) in sales over the past four months, but it accumulated 37.2 billion won of operating losses, its regulatory briefing showed.
Galleria Duty Free 63, a duty-free store run by Hanwha Galleria, said it booked 193.4 billion won of sales between Dec. 28 and Sept. 30, but the operating deficit reached 30.5 billion won over the period.
HDC Shilla Duty Free, a joint venture between Shilla Hotel and Hyundai Development, said it posted 228.7 billion won and 16.7 billion won in sales and operating deficit, respectively, in the January-September period.
SM Duty Free, a unit by leading tour agency Hana Tour, said it logged 71.1 billion won in sales and 20.8 in operating losses from its opening on Feb. 15 to Sept. 30.
Doota Duty Free, a unit by power equipment and construction conglomerate Doosan Group, logged 10.4 billion won in sales and 16 billion won in operating losses in the first half of this year. It has not yet disclosed the third quarterly report.
Business prospects remain grim for the fledgling operators as the government is set to give out four new operating licenses in Seoul as a way to promote tourism.
The Korea Customs Service earlier said it will pick the winners next month, but it remains unclear as a snowballing influence-peddling scandal involving the business community has prompted investigation into the companies that donated funds to two sports foundations, involving those vying for duty-free shop licenses.