“Industry is at a tipping point” – Martin Moodie addresses the National Assembly at a key seminar on Korean duty free – The Moodie Davitt Report
SOUTH KOREA. Moodie Davitt Report founder and chairman Martin Moodie gave a video speech today (at a high-level seminar on duty-free products held at the Seoul National Assembly. Moodie said if the Local industry needed more government support to maintain its global leadership, it also had to reduce its dependence on daigou traders reselling in China.
The event, coordinated by the Korea Duty Free Shop Association, was themed “The Post-Corona Era – Changes and Challenges in the Korean Duty Free Shop Industry”.
The event was hosted by representative Ko Yong-jin of the ruling Democratic Party of Korea.
Speakers, panelists and moderators included Kim Jae-ho, professor of tourism management at Inha Technical College; the vice-president of Howon University, Jang Byung-kwon; Kim Hyung-gon, professor of tourism management, Sejong University; Lee Byung-cheol, Professor of Tourism Events, Kyonggi University; and Jeong Kwang-min from the Korea Institute of Culture and Tourism.
They were joined by deputy researcher Lee Soo-gi, head of the JoongAng Ilbo distribution team; Lee Ho-seop, head of the customs system at the Ministry of Strategy and Finance; and Kim Jae-sik, Director of the Bonded Industry Support Section of the Korean Customs Service.
Moodie began his remarks by saying that he had a particular interest and knowledge of the Korean duty-free market, having visited the country almost every year from 1990 until the 2020 pandemic. Is starting to become the number one market in the world. “, did he declare.
“This is a remarkable achievement that has greatly benefited the Korean tourism industry, Korean producers (large and small) and Korean culture – both ancient and modern. Not only a world leader in terms of scale, but a world leader in terms of quality.
“Korea both as a tourist destination and as a duty-free destination cannot remain what we call in English a one-ride pony”
“I have followed the many triumphant moments in Korean duty free history and of course witnessed the rise and rise of Lotte Duty Free to become the world’s number two travel retailer in the Moodie Davitt Report’s annual ranking of the 25 best travel retailers with the Shilla Duty Free ranking. 3 and even the relative newcomer Shinesegae Duty Free number 8 in our ranking based on 2019, pre-COVID sales.
“I documented the evolution of the game that changes the game Hallyu marketing concept over the years, from its very beginnings on Star Avenue in Lotte’s Myeong-dong store to the extraordinary star power of today’s family concerts.
“I also followed Korean Duty Free’s leadership in promoting K-beauty around the world; and in its unparalleled heritage of digital innovation and excellence.
But Moodie warned that the Korean duty-free industry is at a critical point as it grapples with the challenges of the COVID-19 pandemic and the rise of the Chinese duty-free industry.
“Our chain relies on many factors to generate the sustained growth it has generated in recent years, but the most important of all is passenger density,” he said, referring to the collapse of passenger traffic around the world.
However, such an environment also provides opportunities for those who are strong enough, fast enough and flexible enough and this is certainly the case for Korean retail companies, he argued, provided they seize the opportunity. ‘opportunity.
“You have financial strength – it’s not something that can be said for all of your global competitors; a history of innovation and pioneer; unparalleled expertise in digital commerce and communication; intimate knowledge of the Chinese and Korean consumer; superb physical real estate; a dedicated and loyal audience; and of course the greatest star power on the planet.
“In my opinion, Korean Duty Free must build on its heritage – the story of one of the great pioneers of the travel retail industry. In recent years, you have been able to rely on the dynamics of passenger traffic; rising Chinese spending; disparity between Chinese domestic prices and Korean franchises; and of course a huge and thriving daigou business.
“But I think the Korean industry needs help too. Because China’s duty free industry is getting a lot of help from central and regional government and changing the dynamics of travel retail in Asia.
Moodie highlighted the extraordinary growth of Hainan’s overseas duty-free sector, saying it was the result of visionary policies in favor of businesses and consumers. He showed a graph (below) showing the narrowing of the gap between Korea’s duty-free market and that of Hainan, noting that Hainan officials estimate sales in 2022 will reach US $ 15 billion with an increase to US $ 45 billion by 2025. Korean law Free was a market of $ 21.3 billion in 2019, but fell to around $ 13.2 billion last year.
“Hainan is definitely here to stay. But the big question – and I know everyone in Korean retail is constantly asking themselves – is how many of these Chinese purchases will be repatriated overseas again, to places like Korea, Thailand, Vietnam, Singapore and Hong Kong Special Administrative Regions. and Macao, once the Chinese can travel freely, ”he noted.
“From a Korean perspective, I think the interesting angle is not just Hainan’s success, but why. The whole principle of overseas duty free shopping in Hainan is the cornerstone of a “mega-trend” to maximize Chinese consumption at home and repatriate Chinese purchasing expenses from overseas.
“However, as the Chinese domestic market grows and as the authorities try to persuade Chinese nationals to travel and shop in China, I have every confidence that the Chinese will continue to travel abroad in large numbers to China. Don’t forget that only about 14% of China’s 1.4 billion people have a passport.
“But Korea both as a tourist destination and as a duty-free destination cannot remain what we call in English a one-ride pony. You have to diversify your tourist and business attractions to other nationalities and a lot of investment and imagination has to be invested in it.
“I have visited Korea many times, visited beautiful Jeju, lived in bustling Busan, and experienced the uninterrupted excitement of Seoul and am fascinated by your culture, your cuisine , your natural and man-made wonders. As a country, you need to make all of these attractions widely known. “
Moodie emphasized how critical the next stage of development will be in the Republic. “Overall, I think we are at a tipping point for the global and Korean duty free industry. The next steps here in Korea must be the right ones. Duty free and travel retail are a vital vector of employment, tourism and economic wealth.
“The industry must work with the government to ensure that all the hard work of the past 41 years since Lotte Duty Free opened its first store in downtown Seoul is not wasted. “
Moodie also cited other changes in the industry landscape. “The concession model that underpins, or, some say undermines, the airport retail industry will be under greater scrutiny than ever in Korea and elsewhere. The appearance of the new model (s) will have a great influence on the risk appetite of retailers and brands in the future.
“The world got used to shopping online and liked what they saw and the travel retail channel is going to pick up steam in this area. I have no doubts that Korea will continue to lead the way and in this context Lotte Duty Free and its Korean peers are indeed best-in-class in terms of digital commerce and communication.
“What about the role of airlines? Lotte Duty Free has recently linked up with various Korean carriers for its “flights to nowhere”. This proves that the collaboration between the retailer and the airline can work. Why not more such partnerships, especially once flights can actually fly somewhere and not nowhere?
“CSR – in a world gone wrong, the focus on a better, cleaner, greener and more sustainable planet among your target consumers and those who are emerging, will become stronger and stronger. In a sector like travel retail, you are practically at the center of environmental and social issues. The need for leadership is acute and it is good to see Lotte Duty Free leading the way in this regard.
“Now is the time for Korean duty free to focus on the very qualities that made it great in the first place; the qualities that have seen it go from zero to become the world’s largest market in just a few decades; qualities that have enabled it to stand up for local products and local culture more than the duty-free industry of any other country in the world.
“The time has come for all Korean stakeholders to work with the government like never before to protect and develop what has been built. “
Moodie concluded with a well-known Korean saying – 고생 끝에 낙이 온다. “Loosely translated, it means’ At the end of hardship comes happiness. I wish Korea and Korean Duty Free much happiness in the future after all of its recent hardships. “