Four business licenses to run duty-free shop in the Korean capital of Seoul is up for grabs in Oct. 4 auction, and the race for three tickets reserved for large companies is heated with formerly disqualified operators determined to win back the cash-cow business. The bidders - both existing players and newcomers - are eager for both personal and practical reasons.

The upcoming competition is the third government-led auction under a revised law to allow more competition in the duty-free shop market that had been previously dominated by a few conglomerates.

▶ Lotte and SK going all-out

Lotte Group and SK Group are determined to win back their stores in the third bid after face-losing defeat to newcomers. In the November government auction, the Korea’s biggest and the world’s third biggest duty free shop operator Lotte Duty Free lost its license for the nation’s third biggest store in Lotte World Tower to Doosan Group. SK Networks Co. also closed down its decades-old duty free business when it had to relinquish its license in Walkerhill Duty Free to Shinsegae Group.

Lotte has kept the World Tower outlet idle and the entire work force on the payroll despite the cost in symbolic gesture to show its resolve to re-open the shop.

It will pitch that the super-high Lotte World Tower, scheduled to complete construction in December this year, will become a landmark tourist attraction to re-emphasize the need for duty-free presence.

SK is also eager to redeem the license by arguing that the Walkerhill Duty Free would create a big synergy with its connection to hotel, casino, and resort. SK Networks CEO Chey Shin-won is spearheading the recoup operation.

▶ Hyundai’s family battle

A family clash is expected on the Hyundai front. Hyundai Department Store Co. is bidding to host the duty-free shop at its outlet adjacent to the COEX Mall in Gangnam, southern Seoul. After its last bid in joint venture with Mode Tour failed, it established separate entity to prepare solo bid and named planning executive Lee Dong-ho as a chief executive. Hyundai Department Store is the only department major that so far does not have a duty free operation among the top three - Lotte, Shinsegae and Hyundai.

On top of fighting the bigger rivals, the department store faces competition from within.

Hyundai Development Co. has joined up with Hotel Shilla to open a second HDC Shilla store at iPark Tower, just one kilometer away from COEX Mall. Hyundai Development Chairman Chung Mong-gyu and Hyundai Department Store Group Chairman Chung Ji-sun are cousins.

▶ Newcomers

The latecomers that entered the market last year is bidding for new licenses for bigger presence. Shinsegae DF, an operator of Shinsegae Duty Free said Wednesday that it picked Central City, a mall complex hosting Shinsegae Department Store in Gangnam to build its new duty free outlet. The competition is heating up in Gangnam District as the four retail giants -Lotte, Hyundai Department Store, HDC Shilla and Shinsegae- have all selected the posh southern Seoul area for the new bid.

Hanwha and Doosan have not made their choices yet. Doosan wants first to concentrate on Doosan Tower Duty Free - its first retail trial - that opened last year but some market watchers speculate the group could form a joint venture to join the bid at the last minute.

By Son Il-seon and Cho Sung-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]