Lotte Duty Free shifts focus after surprise Incheon Airport exit

Lotte Duty Free, Korea's largest duty-free operator, is shifting its focus toward downtown and online duty-free shops following its surprising exit from Incheon International Airport back in July.

LDF House, Lotte Duty Free's showroom, opened in Myeong-dong, central Seoul, on Thursday [LOTTE DUTY FREE]

Lotte Duty Free, Korea's largest duty-free operator, is shifting its focus toward downtown and online duty-free shops following its surprising exit from Incheon International Airport back in July.

Its latest venture is LDF House, which is a product showroom located in the heart of Seoul's tourist hub, Myeong-dong, rather than selling products. It is designed to be an attraction in itself, with its ground floor adorned with photo zones featuring brand models like the popular K-pop boyband NCT Dream. Visitors are encouraged to explore the upper levels where they can see and test duty-free products, and those interested in purchasing can conveniently do so at the nearby Lotte Duty Free shop, just a five-minute walk away.

The three-story stand-alone building, featuring an eye-catching exterior with Lotte's signature red color and complete with a continuous digital signboard, officially opened with a ribbon-cutting ceremony on Thursday afternoon.

From left: NCT Dream's Jisung, CEO of Hotel Lotte Kim Tae-hong, NCT Dream's Jaemin, CEO of Lotte Duty Free Kim Ju-nam, and NCT Dream's Jeno (third from the right), pose for a picture before cutting the ribbon at the opening ceremony of the first domestic duty-free showroom, LDF House, in Myeong-dong, central Seoul, on Thursday. [LOTTE DUTY FREE]

Along with the attendance of key figures such as the CEOs of Lotte Duty Free and Hotel Lotte, NCT Dream graced the occasion, attracting a diverse crowd of both local and foreign visitors who gathered in Myeong-dong to celebrate the opening in the early morning.

Amid the excitement, NCT's Jisung addressed the crowd, saying, "We kindly request many visits to the LDF House, and please dress warmly as the weather is getting cold," which was met with enthusiastic cheers.

An NCT Dream pop-up store set up on the ground floor at the LDF House [LOTTE DUTY FREE]

The multi-floor establishment is designed to cater to both tourists and shoppers alike.

The ground floor features a photo zone that recreates the set of NCT Dream's Lotte Duty Free advertisement, along with a photo booth where visitors can take the popular four-cut photos with Lotte Duty Free models. To keep things fresh, the pop-up store on this floor is set to change every month, featuring beauty brands like Simihaze Beauty and the beloved Korean character Zanmang Loopy.

Moving up to the second and third floors, visitors can find a display of recommended products by Lotte Duty Free's experienced merchandisers, employing digital signage to showcase some of Lotte Duty Free's bestselling and exclusive products. QR codes provided alongside the products provide easy access to information and links for online duty-free shopping.

Visitors on the hot air balloon-shaped lift at the rooftop of the LDF House [LOTTE DUTY FREE]

The rooftop adds another layer of experiential appeal with a lift designed in the shape of a hot-air balloon, offering customers a photo spot.

The choice to open a duty-free showroom in the bustling area of Myeong-dong stems from a shift in tourist preferences.

"Travel patterns have recently seen a major shift, with a notable increase in individual travelers than group tourists," Kim Ju-nam, CEO of Lotte Duty Free, told the Korea JoongAng Daily Thursday after the opening ceremony. "Therefore we're setting up duty-free shop showrooms in popular destinations often frequented by such individual tourists to offer them unique experiences. We might even consider adding more LDF Houses in the future."

The latest data from Korea Duty Free Shops Association indicates that downtown duty-free shops are now seeing more significant spending from foreign tourists than shops located at airport departure terminals — with August figures showing that downtown shops generated 13 times more revenue at 831.8 billion won ($614 million) than duty-free shops at the departure terminals at 65.8 billion won.

Lotte Duty Free had to conclude its operation at Incheon Airport at the end of June due to losing in a bid to secure a spot at the airport. Instead, it plans to capitalize on the altered spending preferences of tourists as an opportunity for revitalization. Sales at Lotte Duty Free's downtown shops in Seoul, the Myeong-dong and the Lotte World Tower branches declined by 5 percent in July compared to the previous month. But they rebounded by 3 percent in August and 27 percent in September.

The change of trends in how Chinese tourists visit Korea has also contributed to Lotte Duty Free's strategy. Before the Covid-19 pandemic, Chinese visitors often came to Korea in organized groups and made substantial purchases at duty-free stores. However, there is now a shift toward individual travelers who tend to spend less per person when exploring Korea.

"The performance driven by Chinese group tourists may not have reached our initial expectations, but it appears to be gradually on the rise," Kim said. "Looking ahead to the first half of next year, we expect to see a numerical increase similar to previous trends, albeit with some variations in its nature."

Foreign visitors explore Lotte Duty Free items at LDF House in Myeong-dong, central Seoul. [LOTTE DUTY FREE]

Lotte Duty Free is optimistic that its promotional showroom will fuel growth for its online duty-free shops as well. To access the showroom, visitors need to register on the Lotte Duty Free mobile application.

Furthermore, the government's decision to allow liquor sales at online duty-free shops from July, as part of its efforts to boost duty-free shopping, is expected to accelerate the growth of Lotte's online duty-free business.

"We attracted around 500 visitors per day during the initial week of opening," a Lotte Duty Free spokesperson said. "We expect this number to grow to more than 1,000 daily visitors in the near future."

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]