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New Sydney Lotte Duty Free Store Emphasizes Beauty and Targets $800MM Over a Decade

May 8, 2022
May 8, 2022
Lotte Duty Free

South Korea’s biggest travel retailer, Lotte Duty Free, is making a strong statement in Australia as it opens its first store in Sydney covering 3,000 square meters, showcasing more than 100 beauty brands.

Lotte said that the downtown opening on May 5—on the corner of Pitt Street and Market Street in the heart of Sydney’s retail district—marks the “restart of our global business” and a “full-fledged entry into the Oceania duty-free market.” A target of close to $800MM over 10 years has been set for the three-level store. 

This is the retailer’s first opening in almost two years, following its Singapore Changi Airport debut of wines and spirits stores, opened at the height of the pandemic in June 2020 with a footprint of 8,300 square meters.

The Sydney store interiors—from Australian design company Bates Smart—have a contemporary feel while also integrating enough technology to keep customers interested and informed. “Design innovation and client experience were the guiding principles,” said Stephen Timms, CEO of Lotte Duty Free Oceania in a statement. “It is something we want people to build into their plans and be excited to experience as part of their international travel journey.” 

Among the beauty lineup are some brands that are new to the Australian travel retail market such as Pola and Cosme Decorté. They join standard labels like Estée Lauder, Gucci Beauty, La Prairie, Lancôme, Shiseido, SK-II, Sulwhasoo, and Australian brands including Beauty Chef and Vita Glow. Niche fragrances such as Le Labo, Frederic Mall, and Killian will also be there.

Category-by-category strategy

Lotte Duty Free has different operating strategies for each product category depending on how the Australian tourism market recovers. In the case of cosmetics, the average price is set 15% lower than the local retail price in Australia. Lotte plans to offer differentiated shopping experiences in what it claims is the largest cosmetics store in the region.
 
In the alcoholic beverage and watch categories, the marketing is aimed more at Australians and New Zealanders. Alcohol duty-free import limits are higher than that of other countries, so this will be a focus, with brands tailored to local preferences—and plenty of tastings thrown in. 

After the Australian duty-free market recovers to a certain level, Lotte says that top-tier fashion and jewelry brands will be introduced in the form of boutique stores to target customers with high purchasing power.

Good timing?

The timing is right for the Lotte move. Australia’s travel market is back in play after the country dropped its zero-COVID ambitions and fully reopened its borders in early March. Australian Bureau of Statistics provisional data for March show that the number of passengers leaving Australia nearly doubled versus February to almost 340,000, but is still way off its former peak of 2.24MM in December 2019. Nevertheless, the Australian tourism market—both inbound and outbound—has turned a crucial corner and is now rebounding. 

Lotte Duty Free has set a sales target of just over $790MM (1 trillion Korean won) over 10 years for the new Sydney store, a big proportion of that coming from cosmetics and perfumes. Other categories include watches, jewelry, and wine and spirits. In a statement, Lotte Duty Free said that it plans to become Australia’s largest duty-free operator by using its downtown Sydney store as a “stepping stone.”

According to the South Korean retailer, the Australian duty-free market was worth about $800MM annually pre-COVID, which is why there has been some strong competition there between retailers such as Dufry, DFS, and Heinemann, which has the vast Sydney Airport duty-free concession and where, despite falling revenue for the airport, luxury brands have stayed committed

Lotte Duty Free first entered the Oceania market after acquiring five duty-free shops in Australia and New Zealand from JR Duty Free in August 2018, and entered the downtown domestic duty-free industry there a few months later in January 2019.

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