Lotte Shopping in Crisis 'Reset'... Closing 200 Inefficient Stores

[Asia Economy Reporter Lim Hye-sun] Lotte Group has put Lotte Shopping, which posted a large-scale deficit last year, on the operating table. First, it will improve its structure by closing about 200 stores including large marts and supermarkets.

On the 13th, Lotte Shopping announced its '2020 Operation Strategy' along with its 'Future Business Blueprint.'

Due to the overall deterioration of the domestic consumption economy and intensified competition between online and offline channels last year, Lotte Shopping's operating profit fell by nearly 30%. Lotte Shopping announced that last year’s sales were 17.6328 trillion won and operating profit was 427.9 billion won, down 1.1% and 28.3% respectively compared to the previous year. Looking at the fourth quarter alone, operating profit sharply declined by 51.8% year-on-year to 43.6 billion won.

The net loss for the period was 853.6 billion won, more than doubling the deficit compared to the previous year. In the fourth quarter alone, a net loss of 1.0164 trillion won was recorded. In particular, discount stores (marts) and supermarkets performed poorly. Marts turned to an operating loss of 24.8 billion won last year. Supermarkets recorded an operating loss of 103.8 billion won, dragging down performance.

Lotte Shopping plans to improve operational efficiency and profitability through intensive downsizing. First, it will conduct store restructuring. Out of a total of about 700 stores including department stores, marts, supermarkets, and LOHB's within Lotte Shopping, about 200 inefficient stores will be closed. This means reducing 30% of all offline stores.

Earlier in December last year, Lotte Shopping reorganized its department store, mart, supermarket, e-commerce, and LOHB's business divisions into an integrated (HQ) corporate structure. Affiliates were converted into corporate business units. In the past, each business unit within the corporation operated under an individual representative system and made independent decisions, which prevented efficient use of company resources for the overall performance of the corporation. The integrated corporation, overseen by Kang Hee-tae, Head of Distribution BU (Vice Chairman, pictured), acts as a 'control tower' making decisions, while each business unit operates focusing on 'product development and sales activities.'

Lotte Shopping also presented a future business blueprint to transform from a 'distribution company' into a 'service company' proposing a lifestyle. It plans to reset a total of 1 million pyeong of offline space and create synergy among business units by remodeling stores that cross the boundaries of business types.

Food sections in small and medium-sized department stores with low competitiveness will be replaced by supermarkets with fresh food competitiveness, and the fashion zone in marts will be planned by department store fashion buyers who have buying power over various brands.

Along with this, by utilizing data from 39 million customers, Lotte Shopping plans to integrate and analyze all customer product behavior information and combine the strengths of offline and e-commerce to provide personalized services to each customer. Lotte Shopping plans to launch the 'Lotte ON' service in the first half of this year.

Kang Hee-tae, CEO of Lotte Shopping, emphasized, "Solving fundamental problems and achieving visible results as quickly as possible is the top priority for Lotte Shopping right now," adding, "We will do our best to create a good company that earns the sympathy of customers, employees, and shareholders."

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