Remembering that even golden eggs can crack

Welcome to The Moodie Report’s interim Honolulu Bureau at The New Otani Kaimana Beach Hotel.

I arrived from Seoul via Hawaiian Airlines on Friday after the most hectic of weeks I can recall in a long time, a week packed from early in the morning till late at night with breakfast meetings, lunches, dinners, after-dinner drinks and plenty of interviews in between.

After a much-needed siesta on Friday afternoon in Honolulu (one of the benefits of flying back in time) I had the pleasure of dinner at my hotel’s beachside restaurant with Sharon Weiner (below), DFS Group’s former communications and public affairs supremo here and the best-read person I know.

As is Sharon’s want, she arrived for dinner clutching a present for me. A book of course, Colum McCann’s acclaimed Transatlantic. I shall save it for the most appropriate part of this long, long trip, the final part of the San Francisco-London flight that takes me across said ocean.

The beach here, a 15-minute walk from Waikiki just along the waterfront, is called San Souci. That’s French for carefree and it’s wholly appropriate.

On Saturday morning I woke before sunrise and watched in wonder as the day broke, the moon just appearing to ease its way gently into the sea, the most ethereal sight. Later I walked down to the Outrigger Canoe Club near my hotel, where I sat and talked to two of the most influential senior executives in DFS’s glittering history in the Pacific, Richard Hunter and John Reed. As the anecdotes flowed so the hours passed like minutes. Key influences both in an extraordinary story.

Today I breakfasted with perhaps the great unsung hero of the duty free industry, Peter Fithian and his wonderful wife Bobbi (below).

Peter runs Greeters of Hawaii, a business that specialises in welcoming visitors to the airport with a smile, a kiss and a lei. He once featured in a famous CBS show called ‘What’s my Line’ (which I recall from my childhood in New Zealand) in which panellists had to guess peoples’ unusual occupations. Peter’s was to kiss girls for a living.

Over half a century ago, Peter tipped off a young fellow graduate from Cornell University that Honolulu Airport was planning to open a small duty free shop. That graduate was one Robert Warren Miller. Bob Miller. And that shop, together with a tiny store at Hong Kong’s old Kai Tak Airport, was the foundation of an eventual multi-billion dollar empire that became Duty Free Shoppers (and now DFS Group).

Bobbi also played a big role in DFS’s early days, selling duty free pre-order (for pick-up at the airport) at city hotels (long before DFS had a downtown shop) to Japanese tourists. She is a successful businesswoman in her own right, owning Tiare Enterprises, which has a string of gift stores in Hawaii’s airports.

Tonight I dined with them again, together with John Reed and his charming wife Rose. Again the recollections, and laughs, flowed fast and free. What wonderful people, all contributors to a unique corporate and human saga that shaped our industry as we know it today.

My week in Seoul concluded with a fascinating full day of store tours (Lotte’s flagship downtown shop), interviews (Lotte, Shinsegae, Incheon International Airport) before the late flight out from Incheon to Honolulu. At this rate I’m hoping to be home in time for Christmas… or at least in time for departure to The Trinity Forum in September.

[Shinsegae department Seoul in downtown Seoul; watch this space as the company steps up its expansion plans in duty free]

[Shinsegae Duty Free’s highly experienced MD Merchandising Team Seok-Ho Hong outlines the retailer’s travel retail ambitions to me]

Korean travel retail is buzzing again. This time, thankfully, not with the entirely negative news of the past MERS-ruined few weeks but with talk of recovery, new stores (and new retailers), an IPO of the industry giant and, most of all, of a potential battle royal for the four downtown duty free licences that come up for renewal between now and Christmas (Lotte x 2 in Seoul; WalkerHill in Seoul; and Shinsegae in Busan).

You can find my coverage of all these developments and issues on The Moodie Report website and in our latest e-Zine, while sometime 35,000 feet up in the sky over the next few days I will try to put it all together for a major Korean travel retail feature for our forthcoming Print Edition.

Korea’s duty free market is the biggest in the world and, as ever when such big prizes are at stake, ultra-competitive. You could see that by the intense competition for the recent Incheon retail concessions and the new Seoul and Jeju downtown duty free licences. How the current renewals play out is the talk of the town.

[With the ambitious Hanwha Galleria team, a new force in Korean duty free, both downtown and airport. Look out for my interview coming soon.]

On Thursday I returned to the excellent CasAntonio Italian restaurant in Seoul to have a pleasant dinner with Regina Hahm, Equity Analyst (Cosmetics, Hotel & Leisure, Fashion) for DB Daewoo Securities Co. Regina (below) has an acute understanding of the sector and a welcome neutral perspective on some of the current developments.

We spoke about the proliferation of duty free licences here, which might seem like a good thing to those (and there are many) wishing to encourage greater competition and weaken the grip of the chaebols.

The reality, however, is that those very chaebols, Lotte and Shilla (Samsung), have done an extraordinary job in creating the world’s largest duty free market; playing a bigger role than any other sector in driving Chinese tourism; and creating thousands of jobs in the process.

To any non-Korean with an understanding of this industry, it seems (and, I think, is) irrational to weaken these companies’ grip at home (which also would undermine their ability to compete abroad). Korean politics though are a volatile affair, and there is a great deal of showboating to public sentiment on the conglomerate issue.

[Lunch with Lotte Duty Free]

The reality is that duty free retailing is a hugely complex, costly business that requires investment and professionalism. Dividing up the cake into more portions doesn’t necessarily grow it. And while Korea’s travel retail market (pre-MERS) has been in strong and prolonged growth mode over recent years due to the surge in Chinese travellers, it is also dangerously reliant on a single customer base. MERS showed what can happen if that base is eroded.

On Friday I had the immense pleasure of meeting a man who enjoys legendary status within Lotte Duty Free, Kim Bo Joon, the retailer’s Marketing Director (top two pictures below) together with Kim Tae Won (Team Leader Global Business Development, pictured bottom)) and Kim Won Sik  (Team Leader, Outbound Marketing Team) and their colleagues.

Kim Bo Joon may just about be travel retail’s most brilliant creative spirit and marketeer (rivalled only a couple of individuals in DFS whom I won’t embarrass by naming here).

That is some claim but his influence within Lotte runs deep – and his insight in terms of understanding, segmenting (I’ll explain the map of China behind him next time), communicating with and providing for the Chinese traveller is simply astounding. Some of his work on ‘Hallyu’ (Korean Wave) marketing has been game-changing and I can promise you there is something even more exciting in the wind. Watch this space.

I’ll save any further comment for a further Blog (and a major feature on our website) but will close with this simple observation: Lotte Group was directly responsible for generating 20% of the Chinese visitors who came to Korea last year, as well as providing many of the biggest attractions (not just shopping) once they got there.

The proliferation of licences suggests the government views the Chinese shoppers as a golden egg. I suppose they are. But like any egg, the golden variety is also fragile. Korean politicians should forget that at their country’s peril.

Footnote: I closed out my trip with a very pleasant early dinner on Friday with my long-time friend Bumho Kim (above), who heads Incheon International Airport’s commercial team.

It was especially good of Bumho to meet me as he is flat out preparing for the handover on Tuesday to the airport’s new retail concessionaires – their five-year contracts starting that day.  It’s an exciting but transitory time at Incheon. Many of the stores will not be finished for several months with lots of temporary shops dominating the retail landscape. Never mind: normal service will soon be resumed , Bumho assures me.

Korea, the land of the morning calm? In travel retail I don’t think so.

[From tomorrow, 1 September, Louis Vuitton passes from Shilla to Lotte hands at Incheon]