PERSISTENCE AND PASSION: How YS Choi led Lotte to luxury
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1 MAY/JUNE 06 TRAVEL RETAIL INTELLIGENCE FREE DVD Archive footage: Duty free PERSISTENCE AND PASSION: How YS Choi led Lotte to luxury Incheon Airport: The world s biggest duty free tender beckons The industry s top retailers revealed Gebr Heinemann creates Airport Specials KAL S HEATHER CHO JULIÁN DÍAZ ON THE BRASIF DEAL MONTBLANC SCALES NEW PEAKS
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4 May/June 2006 THE MOODIE VIEW Welcome to The Moodie Report. This is a landmark issue on many levels and it s one we are particularly proud of. Landmark in its scope, in its size and for the fact that it introduces a new Editor (more on that later). We ve spent many weeks on the road and above the skies preparing this blockbuster edition, a journey that at one point memorably took us consecutively through the three biggest duty free locations in the world, London Heathrow, Dubai and Incheon International airports. Each has its own distinct character, retail mix and approach, uniquely tailored to three very diverse passenger profiles. How would the three retailers cope with a job switch for a month, I wonder? Would Dubai s expansive approach work in Incheon? What would World Duty Free do if given the Dubai opportunity? Would Lotte s amazing big boutique success with the Japanese and Koreans translate to Heathrow T3? Having briefly stopped in Dubai to witness the advance of a new bronze age (page 202) we headed to Incheon, the much-acclaimed South Korean gateway airport. We suspect our journey to Seoul will be echoed by many of the world s leading travel retailers in coming months, following our recent revelation that Incheon International Airport Corporation (IIAC) is planning to tender both its existing space and also the new Concourse A that is set to open in August Whether it will be a collective or separate tender has yet to be decided though the odds favour the former, given the expiry of the current contracts in February Whatever that decision, the combined turnover represents the industry s biggest slice of business available anywhere. It will therefore attract intense interest from Korean and international companies. Only London Heathrow outranks Incheon s US$796 million (at current exchange rates) duty free turnover in 2005 and the UK airport is of course in the hands of World Duty Free, the wholly-owned subsidiary of airport owner, BAA. That makes the London gateway, like industry number three Dubai Airport, off limits (unless BAA, currently under the acquisitive microscope, is sold and the new owner adopts a different approach to owned retail but that, as they say, is another story). With food & beverage also coming up for tender, we think you ll find our report on Incheon compelling reading, stacked as it is with numbers and insights from IIAC General Manager Retail Marketing Bum-Ho Kim. He s an astute individual who has monitored carefully the merits of the four-retailer model that Incheon embraced initially. While no decision has been reached we suspect he shares our view that the offer, though very good in places, could do with more diversity, less duplication and an improved offer to nationalities other than Koreans and Japanese. Retracing my original route to London for example, back through Dubai, there was no question where I was going to buy toys for my children Dubai s excellent kids area won the race hands down. Mr Kim says the IIAC may opt for a more Changi-like approach, segmenting tenders by categories (liquor & tobacco, fragrances & cosmetics etc). It will be a fascinating call on his part. From Incheon we headed downtown then upstairs to the 9th and 10th floors of the amazing Lotte Department store building in Seoul. I love this place. From the food smells to the vibrancy of the colours to the immaculate grooming and politeness of the staff, it s just a great consumer experience. Meanwhile, upstairs the international travellers mainly Japanese and Koreans are being treated in similar style in the duty free zone. If the new Louis Vuitton store looks a million Dollars that s because it is the outlet is currently turning over a tidy US$4.5 million a month one of the French luxury house s top few boutiques in the world. Our exhausting London-Dubai-Seoul return trip was nothing compared to the career journey taken by Mr YS Choi, in our view the great pioneer of Korean duty free (see page 64). Next time you re complaining about your workload, think of Mr Choi. 28 years in the job, a The Moodie Report
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7 May/June 2006 THE MOODIE VIEW departure for the office and a return home. Seven days a week. Taking his breakfast on the road every day. With no vacations and no time off with his family for Korean childrens day because it always clashes with Golden Week, the peak period in Japanese travel. Think of Mr Choi in the 1980s, trudging around the European luxury houses on the most miserly of expense budgets and being treated dismissively by some of the great names that now grace the Lotte store. Think of Mr Choi refusing to give up, determined to sell his company and his country to the biggest brands in the business. And think of how Mr Choi succeeded. Vuitton, Chanel, Hermès, Prada, Bvlgari and more they re all there today. He s a great man and we think it makes for a great article. And we hope you ll agree it s just one of many. At The Moodie Report we try hard to capture the people and the poignancy of the business as well as its performance. You ll love, we think, our interview with a man called Wolff (Heinrichsdorff, Managing Director of Montblanc International, page 156); you ll warm to Korean Air s Hyun-Ah (Heather) Cho as our lunch guest (page 75) as we did and you ll feel nothing but immense respect for that influential Irish globetrotter Liam Skelly (164), in a lovely article written by Dermot Davitt. Ah yes, Dermot Davitt. Another industry Irishman. And a fine reporter, commentator and Editor. We re delighted that he joins us from DFNI to coincide with this issue; a further strengthening of what we are confident is the best team in the business. We are as proud of our product, our brand and our people as individuals such as Wolff Heinrichsdorff, Heather Cho, Julián Diaz (page 185) and John Sutcliffe (page 191) are of theirs. Enjoy The Moodie Report and, as always, thanks for your readership and support. Martin Moodie, Publisher An Asia Pacific view from Rakhita Jayawardena As this edition of The Moodie Report will be published at the Tax Free Asia Pacific exhibition in Singapore, we decided to share our lead editorial pages with Asia Pacific Travel Retail Association President Rakhita Jayawardena. In a snapshot interview we asked him about business performance, prospects and potential. On the eve of the TFAP show what s your view of the state of the health of the Asia Pacific travel retail and duty free industry this year? Well nourished and robust with sales forecast to reach over US$9 billion in And going forward? Progressing fast with sales to reach over US$12 billion by Our region will be the global leader by that time. The biggest opportunities? The Chinese and Indian international travellers; and waking up the three sleeping giants, China, South Korea and Japan towards Arrivals duty free. The biggest threats? The airport authorities failure to cater to the increased passenger numbers and to develop airport infrastructure in a timely manner to take advantage of the new generation of wide-bodied aircraft. Also the momentum of the anti-tobacco threat. And APTRA is it in good heart? What s preoccupying the Association most today? Yes, it s alive and ticking well. The preoccupations are the opportunities for Arrivals shopping in the region and the impact of the tobacco threat. Are you enjoying the role? What s been your single highlight to date? Yes, very much so. It is great to work with a Board who have given freely of their time and effort in order to build a solid foundation for APTRA. The highlight? Successfully creating awareness of and credibility for APTRA by enrolling an industry cross-section of top-class members, approaching 50 by the end of our first year. You are a fine orator, but do you have just one word to sum up the Asia pacific business? Burgeoning. The Moodie Report 7
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