Lotte, SK Networks face tough road after losing duty-free licenses

Tourists at the Lotte Department Store in Myeongdong, Seoul.

Korea's top duty-free operator Lotte and SK Group subsidiary SK Networks have to close their lucrative duty-free stores ― one each ― after the government chose to give the license to rival bidders Shinsegae and Doosan last week.

To minimise the negative impact of losing stores, the conglomerates are now mapping out plans on utilizing their duty-free shop space, even as their staff risk losing jobs.

Lotte, which could not renew the license for its outlet at Lotte World Tower in the affluent Gangnam region, has decided to retain the entire workforce of 13,000 after holding an emergency meeting on Monday.

"The employees at Lotte World Tower including full-time and part-time workers will be reallocated to other Lotte duty-free stores and Lotte subsidiaries like shopping malls and hypermarts to help them to retain their jobs," Lotte Duty Free CEO Lee Hong-kyun told reporters.

He said the retail giant's subsidiaries including Lotte Department Store and Lotte Mart agreed to work together to tackle the employment problems stemming from the "unexpected result."

Lotte invested some 300 billion won (S$3.6 million) to build the 10,990-square-meter store which opened in 2014. It is the largest duty-free store in Seoul and the world's third largest by scale.

Lotte is currently considering two options to utilize the store space. One is to open luxury stores and the other is to relocate its existing duty-free store at Coex in Gangnam to the country's tallest skyscraper.

Meanwhile, SK Networks, which lost its license for the duty-free outlet at the Sheraton Grand Walkerhill Hotel in northeastern Seoul, has not decided on its steps to deal with the sudden labour surplus.

"We are still deliberating. Nothing has been decided yet," a SK Networks officer said.

The company has been running the duty-free store for 23 years and some 900 employees work at the location.

Industry insiders said Shinsegae which beat SK Networks to take over its Seoul license will hire some of SK's workers, but not all.

On Tuesday, Shinsegae DF CEO Sung Young-mok said the company will need at least 30,000 workers for its new duty-free store which will open in April.

"Shinsegae is aware of the need for hiring the existing workers from the former duty-free operators and we are willing to do so," the CEO said.