Duty Free Retail: King Power monopoly bid

King Power's bid for duty free at Don Meuang Airport 55% more than nearest bid, seeking complete monopoly control over industry at any cost, experts conclude.

Photo above of duty free shops in a Don Meuang airport commercial areas (Source: Wikipedia)

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Transport

King Power's Don Mueang bid astonishes

ANALYSIS: Enormous offer to AOT crushes the competition, likely tightening the duty-free operator's stranglehold
30/08/2012

Amornrat Mahitthirook

King Power Duty Free Co has proposed a surprisingly high return to Airports of Thailand Plc (AOT) in its bid for the contract to run the duty-free and commercial areas at Don Mueang airport.

The AOT board is expected to select the company to run the duty-free shops at the old airport today.

According to a source at AOT, King Power Duty Free is offering a minimum return of 63 million baht a month, or 756 million baht a year, to AOT. In comparison, Central Retail Corporation has offered a minimum return of 40.6 million baht a month, Shilla Mall consortium proposed at least 35.2 million baht a month and Siam Future Development Co presented an offer of at least 24.2 million baht every month.
 
The proposed financial returns from King Power Duty Free are 55% more than Central Retail's offer and nearly three times Siam Future's bid.

However, the steep offer was called into question by some observers given that Don Mueang will only serve a small number of international flights.

The airport will handle about three million passengers on international flights a year.

Only passengers of international flights are entitled to buy products at airport duty-free shops.

If King Power Duty Free wins the contract at Don Mueang airport, it will monopolise the airport duty-free shop business in Thailand. There is usually more than one duty-free shop concessionaire at overseas airports, unlike Thailand, the AOT source said.

The proposal for the business at Don Mueang airport could prompt the AOT to consider if the returns from King Power Duty Free at Suvarnabhumi airport are too low.

The company pays 2 billion baht to AOT annually for its duty-free shop and commercial space contracts at Suvarnabhumi airport which serves 36 million passengers annually.

An aviation industry source said King Power Duty Free might be offering the huge return at Don Mueang airport to crush the competition.

The company may want to retain its presence at all of the country's major airports to gain stronger bargaining power over the companies that supply goods to its shops.

The greater bargaining power could translate into larger discounts for the company from suppliers amounting to tens of billions of baht annually, according to the source.

At present, King Power Duty Free has very high bargaining power compared to most duty-free operators in the world, and it can choose to place or reject products at its commercial areas at airports.

AOT chairman ACM Sumet Photimanee said the AOT board would consider the selection of the duty-free and the commercial area operators at Don Mueang airport today.

He said the decision had to be concluded quickly because Don Mueang airport will reopen fully for commercial services on Oct 1.

He added that basically the contender proposing the highest returns for AOT should win the concession.

However, the AOT would also take into account how the company will be able to achieve its revenue target.

(Source: Bangkok Post, Transport, King Power's Don Mueang bid astonishes, ANALYSIS: Enormous offer to AOT crushes the competition, likely tightening the duty-free operator's stranglehold, 30/08/2012, Amornrat Mahitthirook, link) 
 

Duty Free Retail Industry Vocabulary

duty free shop - stores that sell goods to travellers without many taxes added because they are taking the goods out of the country (just as if the customer was buying the good outside of the country) (See Wikipedia)

King Power Duty Free Co - the company that owns all the duty free shops and other shops at Suvarnabhumi airport: "a Thai travel retail company based in Bangkok. Its current chairman and CEO is Vichai Raksriaksorn. The company is the leading travel retail in the country, with its own Duty Free shopping mall covering over 10,000 square metres and at Suvarnabhumi Airport and other places. 2010 it employed over 3,000 persons" (See Wikipedia)

Airports of Thailand Plc (AOT) - a large Thai public company which runs several airports in Thailand established in 2002, "as a result of the privitisation of state-owned Airports Authority of Thailand (AOT). At that time, the company was worth 14,285,700,000 Baht. The Royal Thai government held 70% of the company's stock. In January, 2006 the company was valued at 203,345,996 Million Baht" บริษัท ท่าอากาศยานไทย จำกัด (มหาชน) (See Wikipedia)

Don Mueang airport - (See Wikipedia)
Suvarnabhumi Airport - (See Wikipedia)
transport - to move people or things from one place to another ขนส่ง

bid - an offer to buy something at a specific price ยื่นเสนอราคา
bid for the contract

astonish - surprise, amaze ทำให้ประหลาดใจ
bid astonishes

King Power's Don Mueang bid astonishes

concession - official permission from the government to do a certain type of business สัมปทาน
duty free concession
concessionaire - the owner of a concession

crush the competition - destroy the other companies that a company competes with (in the same industry)
crush - destroy; to press something so hard that it breaks into very small pieces กด บีบอัด

strangle - to hold something very tightly (example: the murderer strangled the person's neck)
stranglehold - a very tight hold on something; very high level of control
 
tighten - increase the tightness; hold more strongly with your hand 
tightening the stranglehold - increase control over something (holding more tightly = more control)

tightening the duty-free operator's stranglehold

analysis - looking closely at how something works in order to understand it better การวิเคราะห์

ANALYSIS: Enormous offer to AOT crushes the competition, likely tightening the duty-free operator's stranglehold

proposed - suggested (but not yet chosen or decided upon)
return - the amount of money that a person makes from a business or investment
proposed a surprisingly high return

commercial - for business purposes
commercial areas - the areas in an airport where goods and services are sold to travellers
commercial space - Same as "commercial areas"
commercial services

run the duty-free and commercial areas

King Power Duty Free Co has proposed a surprisingly high return to Airports of Thailand Plc (AOT) in its bid for the contract to run the duty-free and commercial areas at Don Mueang airport.

board - board of directors; the small group of people who make high level decisions and policy in an organization
The AOT board

expected - believe will happen คาดว่า (จะเกิดขึ้น)
expected to select the company today

The AOT board is expected to select the company to run the duty-free shops at the old airport today.

source - someone who gives information to the media แหล่งข่าว
according to a source at AOT, ...

consortium - a group of companies working together on a project สมาคม,สหภาพ,ห้างหุ้นส่วน,สมาคมนายธนาคาร

According to a source at AOT, King Power Duty Free is offering a minimum return of 63 million baht a month, or 756 million baht a year, to AOT. In comparison, Central Retail Corporation has offered a minimum return of 40.6 million baht a month, Shilla Mall consortium proposed at least 35.2 million baht a month and Siam Future Development Co presented an offer of at least 24.2 million baht every month.

financial returns - the amount of money made from a project,business or investment
proposed financial returns
 
The proposed financial returns from King Power Duty Free are 55% more than Central Retail's offer and nearly three times Siam Future's bid.

steep - rising quickly and difficult to climb ที่สูงชัน และปีนขึ้นยาก
steep offer - very high offer, offer of a very large amount of money

called into question - asking questions about something (maybe it is not what it seems to be)
observers - experts watching the situation develop; watching what happens 

the steep offer was called into question by some observers

international - ระหว่างประเทศ between countries
international flights - airplane flights to other countries  

entitled - having the right to have or do something มีสิทธิโดยชอบ
entitled to buy products at airport duty-free shops

However, the steep offer was called into question by some observers given that Don Mueang will only serve a small number of international flights. The airport will handle about three million passengers on international flights a year. Only passengers of international flights are entitled to buy products at airport duty-free shops.

wins the contract - get the business contract to supply an organization with something they need

monopolise - control all of something (such as an industry)
monopolise the airport duty-free shop business in Thailand.

overseas airports - Same as international airports" (airports with international flights)
usually more than one duty-free shop concessionaire at overseas airports

proposal - a plan or suggestion for a group to consider ข้อเสนอ
prompt - to cause something to happen or be done ก่อให้เกิด กระตุ้น

If King Power Duty Free wins the contract at Don Mueang airport, it will monopolise the airport duty-free shop business in Thailand. There is usually more than one duty-free shop concessionaire at overseas airports, unlike Thailand, the AOT source said. The proposal for the business at Don Mueang airport could prompt the AOT to consider if the returns from King Power Duty Free at Suvarnabhumi airport are too low.

annually - happening every year ทุกๆปีด
pay 2 billion baht annually
the company pays 2 billion baht to AOT annually

contract
commercial space contracts

The company pays 2 billion baht to AOT annually for its duty-free shop and commercial space contracts at Suvarnabhumi airport which serves 36 million passengers annually.

aviation - the flying of aircraft การบิน science of flying aircraft ศิลปและศาสตร์ในการบิน
aviation industry

An aviation industry source said King Power Duty Free might be offering the huge return at Don Mueang airport to crush the competition.

presence - when someone or something is in a place or is part of an industry, etc การอยู่ในสถานที่หนึ่ง (ของบุคคล)
retain - to keep or continue something รักษา
retain its presence - continue to be in a place or participate (in an industr, for example)

bargaining - try to get a better deal from someone (for example, a better price for something you want to buy)
bargaining power - the power to get what you want when bargaining or in negotiations
gain stronger bargaining power

The company may want to retain its presence at all of the country's major airports to gain stronger bargaining power over the companies that supply goods to its shops.

translate into ... - results in ... , leads to ...
translate into larger discounts

The greater bargaining power could translate into larger discounts for the company from suppliers amounting to tens of billions of baht annually, according to the source.

operator - businesses doing this business
duty-free operator

reject - not accept something; to not agree with a request, offer or proposal ปฏิเสธ ไม่ยอมรับ
reject products - not accept products for selling in store
reject products at commercial areas in airports

At present, King Power Duty Free has very high bargaining power compared to most duty-free operators in the world, and it can choose to place or reject products at its commercial areas at airports. AOT chairman ACM Sumet Photimanee said the AOT board would consider the selection of the duty-free and the commercial area operators at Don Mueang airport today.

concluded - finished; ended
the decision had to be concluded quickly

contender - a person or organization competing to win something in a competition or competitive bidding

take into account - use some information in making a decision

target - a goal; the amount you are planning to achieve เป้าหมาย
revenue - income from taxes or business activities รายได้

revenue target
achieve its revenue target

He said the decision had to be concluded quickly because Don Mueang airport will reopen fully for commercial services on Oct 1. He added that basically the contender proposing the highest returns for AOT should win the concession. However, the AOT would also take into account how the company will be able to achieve its revenue target.