With South Korean retail giant Shinsegae obtaining two licenses to operate duty-free stores at Incheon Airport’s Terminal 1, competition between fast-growing travel retailers is expected to intensify, industry experts said Monday.

Shingsegae DF Global -- the third-largest duty-free operator following Lotte and Shilla in terms of market share -- was picked as the sole operator for two duty-free zones Friday. The areas were vacated by Lotte Duty Free in February over rent cost. 

Based on the 1,000 point evaluation by Incheon International Airport Corp. and the Korea Customs Service’s panel of experts, Shinsegae headed off strong competition from Shilla Duty Free, securing the perfumes and cosmetics concession and luxury boutique slot at the country’s major gateway. 

The two duty-free zones were known to be posting more than 900 billion won ($812 million) in combined annual sales.

Following its financial bid, as well as encouraging profits from the company’s stores in Seoul’s Myeong-dong, Busan and Incheon Airport’s T2, Shinsegae is likely to gain a market lead, experts said. 

“Since cosmetics and perfumes are lucrative businesses in the duty-free market, its overall sales will increase, while strengthening its buying power,” said analyst Nam Ok-jin from Samsung Securities.

Revenue from Shinsegae’s duty-free sector this year is expected to reach 2.8 trillion won, 19 percent higher than the formerly estimated figure. 

Winning the bid for the Incheon stores could also improve profits from its hotel brand Chosun Hotel’s duty-free outlet in the short term, she added.

According to the Korea Exchange, shares of Shinsegae on Monday morning increased 5.62 percent and were traded at 413,500 won. The stock has shot up to 475,500 won in the last month, hitting a record high this year.

“Shinsegae DF’s market share is expected to rise up to 18.7 percent by year-end, boosted by the two new duty-free stores at the airport. Considering that it will also open a duty-free store in downtown Gangnam next month, its market share is only to grow, possibly up to 20 percent,” said Kim Myung-ju, a researcher at Mirae Asset Daewoo.

As of last year, Lotte Duty Free held the largest market share at 41.9 percent, followed by Hotel Shilla with 29.7 percent and Shinsegae DF Inc. with 12.7 percent.

(ddd@heraldcorp.com)