Suseo Station Transfer Center Project Fails, How Bad Is the Retail Market...

Struggling Stores and the New Coronavirus
Desperate Cost-Cutting for Survival

Perspective view of the 'Suseo Station Transfer Center Complex Development Project' in Gangnam-gu, Seoul. (Photo by Gangnam-gu)

[Asia Economy Reporter Seungjin Lee] The investment clocks of retail giants like Lotte and Shinsegae have stopped. Amid the changing retail environment where offline stores are struggling, and with the outbreak of the novel coronavirus infection (Wuhan pneumonia) adding to the challenges, companies have started cost-cutting measures for survival. Given the increased uncertainty surrounding their businesses, they plan to take a conservative approach to investments.

According to the retail industry on the 7th, Lotte, Shinsegae, and Hyundai Department Store Group did not participate in the bidding for the 'Suseo Station Transfer Center Complex Development Project,' the largest transit-oriented development project in Korea, resulting in the project being canceled.

The Suseo Station Transfer Center Complex Development Project involves developing a transfer center on approximately 102,208㎡ of railway land around Suseo Station and creating a connected business, retail, and residential complex. Suseo Station is considered a prime location with guaranteed high foot traffic, intersected by the metropolitan high-speed railway, GTX-A line (Samsung to Dongtan), Subway Line 3, Bundang Line, and the planned Suseo-Gwangju Line.

On the 5th, the Korea Rail Network Authority's public announcement for project operator recruitment saw no participation from any company. At the project briefing held in October last year, major domestic retailers such as Lotte, Shinsegae, and HDC had participated in large numbers, raising expectations. The industry also anticipated that the retail 'Big 3'?Lotte, Shinsegae, and Hyundai Department Store?would enter the project.

Therefore, the recruitment for the Suseo Station Transfer Center Complex Development Project has been seen as a litmus test reflecting the difficult situation of the retail industry. Major retail companies that posted poor results last year have launched intensive restructuring efforts since the beginning of the year. In particular, they have been focusing on personnel renewal and streamlining offline operations.

An industry insider said, "Opening new offline stores these days is like gambling in the retail industry," adding, "In the past, companies would have challenged projects looking five or ten years ahead, but now it is difficult to even foresee the next day." He continued, "To prepare for the worst-case scenario, investments will be reduced, and efforts to dispose of non-performing assets will also be undertaken."

Shinsegae Group recorded its highest-ever sales last year with 6.3937 trillion won, driven by growth in department stores and online shopping malls. However, Emart experienced a halving of operating profits, and most offline stores struggled. In fact, this year, the company completely shut down its miscellaneous goods discount store business, 'Pierrot Shopping.'

Lotte Shopping, which manages department stores and marts, is also facing difficulties. Lotte Shopping's sales continuously declined from 2015 to 2018. It is reported that the situation did not improve in the 2019 results to be announced on the 13th. Accordingly, Lotte Shopping has established a strategy to reduce its size and strengthen its fundamentals by cutting loss-making stores in its struggling marts and supermarkets.

All major retail companies are expected to participate in the bidding for the duty-free shops at Incheon Airport Terminal 1, where the final operator will be selected on the 27th. All three major retailers are highly interested in the duty-free business, which has recently shown strong growth. However, the bid price remains a critical factor.

An industry insider said, "There are already numerous ongoing projects, and with the upcoming competition for the Incheon Airport Terminal 1 duty-free shop bidding, companies have no choice but to focus their resources," adding, "They are carefully calculating the bid amount for the Incheon Airport duty-free shop."

This content was produced with the assistance of AI translation services.