Lotte Duty Free, the country's largest duty-free operator in terms of sales, has lost the bidding race for the operational rights of duty-free shops at Incheon Airport. Instead, Lotte's smaller rivals, Hotel Shilla, Shinsegae DF and Hyundai Department Store Duty Free, were shortlisted for the duty-free licensing bid.

On Friday, Incheon International Airport Corp. announced the results in the first round of assessments of bids for the five duty-free zones in the nation's main airport, located west of Seoul.

With the result, Lotte Duty Free will be withdrawing its duty-free business from Incheon Airport for the first time since the opening of the airport in 2001.

According to industry insiders, Lotte Duty Free's partial withdrawal of its business from Incheon Airport earlier played a role in the company losing out in the bidding process, as Lotte Duty Free voluntarily withdrew some stores in 2018 to operate only in DF 3, after succeeding in bidding for duty-free shops at the airport in 2015.

Industry insiders also point to its relatively low bidding amount, compared to Shinsegae DF and Hotel Shilla, as reasons for dropping out of the bidding process.

Along with Lotte, China Duty Free Group, the largest duty-free retailer in the world in terms of sales, also lost out during the first round of bidding due to its lower-than-expected bidding amount and insufficient business proposals.

Market watchers say CDFG's removal from the bidding process will affect domestic retail businesses positively.

"There were market concerns that if CDFG wins the bid, they will largely take away the Chinese customers -- as they currently account for the majority of domestic duty-free business sales. It's fortunate that domestic retailers have managed to survive the bidding process," said an industry insider.

With Lotte Duty Free and CDFG out of the competition, Shinsegae DF and Hotel Shilla are now left as the prime candidates to operate duty-free zones 1 and 2 -- zones dedicated to sales of perfumes, cosmetics, liquors and cigarettes.

Shinsegae DF and Hotel Shilla are now also rival candidates to operate Incheon Airport's DF 3 and 4, which house fashion boutiques.

For DF 5, a zone dealing with boutiques, Hyundai Department Store Duty Free will join the race for the bidding along with Shinsegae DF and Hotel Shilla.

Meanwhile, for DF 8 and DF 9, which are zones for small and medium-sized companies, domestic duty-free retailers Kyung Bok Kung Duty Free and City Plus now remain the rival competitors for the operational rights.

For the list of final candidates, the Korea Customs Service will conduct reviews of the candidates and notify the IIAC of its shortlisted candidates by April at the earliest.

The winners of the bidding process will operate the duty-free zones in Incheon Airport for a maximum of ten years, starting on July 1.