The Korea Herald

피터빈트

Major retailers gear up for online shopping boom

By 신현희

Published : Jan. 13, 2011 - 16:00

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Lotte, Shinsegae, Hyundai speed up expansion of Internet, mobile businesses

Korea’s large retailers are gearing up for intensifying competition online as virtual marketplaces grow on the back of popular mobile computing and social media.

Lotte Shopping, Shinsegae Group and Hyundai Department Store are strengthening their Internet and mobile business operations with plans to open new shops, broaden partnerships and improve user services such as in-store pickup options.

The Big Three retailers have been beset in the online commerce market by a lot of nimble, cost-efficient vendors such as Interpark and G Market.

Experts predict online shopping will continue to lead growth in retail sales, posing a greater challenge to dominant department and discount store operators.

Revenues on Internet and TV shopping are estimated to expand 14.6 percent in 2010 from the previous year, far higher than in other segments, according to Samsung Economic Research Institute.

“Internet shopping malls will increasingly threaten the dominance of large retailers,” said Kim Yoon-tae, secretary of the Korea Online Shopping Association.

Kim said the online market would grow by more than 20 percent to 33.5 billion won ($29.8 million) this year. Combined with TV home shopping, its scale may reach 40 billion won, overtaking that of discount stores by 4 billion won.

Top executives of the retail giants have pledged to enhance online businesses as a top priority for this year.

They are confident of their online charges, taking advantage of the synergy with their brand power, sale expertise, product pools and strong offline networks and facilities.

“Lotte as a leading local retail company has to accomplish the top position in the rapidly growing online market,” Chung Yong-jin, vice chairman and CEO of Lotte Department Store said in his New Year’s speech.

“To accomplish the goal, we should consolidate our brand power and network of over 140 stores for a better delivery system, reset our service structure, and establish new marketing strategies that link online with offline business.”

The country’s largest department store chain plans to distinguish itself in the increasingly crowded sector by opening a premium online mall in July.

The mall will mainly feature high-end labels offering customer-tailored services on an individual basis. The firm also plans massive promotional events in conjunction with offline stores.

The company’s “Smart Pick” service allows customers to pick up what they ordered online at department stores. It saves them delivery fees and offers easy return and exchange services.

Shinsegae Group’s E-Mart online mall also provides fast delivery of fresh fruits. If customers order after 10 a.m., the company harvests fruits the next day and delivers them at once.

The group has witnessed a sharp increase in online shopping sales over the past few years.

Shinsegae Mall sales grew more than twice to 400 billion won in 2009 from 124 billion won in 2006. It now accounts for nearly 30 percent of the group’s output.

E-Martmall’s revenue also nearly doubled to 94 billion won in 2009 compared to 55 billion won in 2007. 

Chung, one of Korea’s most famous users of Twitter, has been actively promoting Shinsegae on the micro-blogging site.

The online shopping race will become more intense as social networking services and the smartphone speed up the spread of social commerce. The number of Korean smartphone users is expected to surpass 10 million this year, up from 6 million at the end of last year.

Lotte Group Chairman Shin Kyuk-ho underscored the importance of social networks in his New Year’s speech as well.

“In this social network era, companies would face a hard time adapting to trend changes unless they communicate with customers and society,” he said. “To have the brand of Lotte give customers new values and satisfactions, we have to get hold of what they truly want.”

Sales of Lotte.com rose more than 37 percent to 110 billion won in 2009 from 69 billion won in 2007. Other companies experienced similar trends in their online shops.

Hyundai Department Store established a partnership with CJ O Shopping’s CJmall last year. Though Hyundai runs its own Hmall, the partnership will facilitate more efficient stock management, the company said. CJ can benefit from a more various product lineup. 

Aside from large online malls run by retail giants, smaller online stores are cultivating open markets, a platform that allows individuals to freely trade their goods, adding spice to the already hot race.

NHN Corp., operator of Korea’s top portal, Naver, is said to be launching its open market service during the first half of the year.

EBay Inc., which runs the biggest e-commerce websites Auction and Gmarket, requested that Naver remove its database from the shopping section early this month.

Emerging from the global slowdown, the domestic retail industry posted a 10.4 percent on-year growth in the first half of 2010, according to Statistics Korea data. Experts put its full-year growth at 7-8 percent.

Sales of department stores hit an all-time record last year. The big three target a double-digit sales increase this year again.

Lotte Department Store recorded more than 10 trillion won in sales last year for the first time in the industry. It aims at 12.1 trillion won this year, up almost 20 percent. 

Hyundai Department Store saw its sales grow 23 percent to 5.8 trillion won last year, while Shinsegae achieved a 26 percent increase in sales to 5.4 trillion won.

The growth rate is likely to slow this year as lingering global uncertainties and concerns about inflation may dampen consumer sentiment. But combined sales in the sector are forecast to reach a record high of over 200 trillion won ($177.7 billion).

Korea’s online commerce transactions including retail and business-to-business deals reached an all-time high of 206 trillion won ($179 billion) in the third quarter, up 27.1 percent from a year earlier, according to Statistics Korea.

Business-to-business transactions, which accounted for 92.7 percent of all sales, jumped 29.4 percent on-year to just over 190 trillion won, with business-to-consumer transactions rising 26.2 percent to 3.8 trillion won.

By Shin Hyon-hee (heeshin@heraldcorp.com)