Lotte Shopping Puts New Business Investment Plans on Hold This Year

Approximately 1 trillion KRW net loss in Q4 last year

DMC Shopping Mall, Gimhae Distribution Complex

Project Delayed

Active Investment in Online Business

[Asia Economy Reporter Lim Hye-sun] Following the launch of a high-intensity restructuring this year, Lotte Shopping has decided to review its new business investment plans. Having recorded a net loss exceeding 1 trillion KRW in the fourth quarter of last year alone, Lotte Shopping concluded that it must postpone large-scale investment plans for survival. This year, the company will focus on improving operational efficiency and profitability through downsizing. However, it plans to actively invest in the online business, which it considers a future growth engine.

According to the distribution industry on the 4th, Lotte Shopping has postponed the development projects of the Sangam DMC Lotte Shopping Mall (hereafter Sangam Lotte Mall) in Mapo-gu and the Gimhae Tourism Distribution Complex. The Sangam Lotte Mall development project is one that Lotte Shopping has devoted a total of seven years to, from securing the site to obtaining business permits. Although it is regrettable that the large-scale funds invested to secure the site remain unused, the company believes that pushing forward with the project recklessly during this emergency management period is difficult.

Previously, in April 2013, Lotte Shopping purchased three plots (total area 20,644㎡) in the Sangam Residential Development District of Mapo-gu through competitive bidding for 197.2 billion KRW. The Seoul Metropolitan Government delayed the building permit review, citing the need for a coexistence agreement with traditional markets. In April 2017, Lotte Shopping filed a 'nonfeasance illegality confirmation lawsuit' with the court, claiming that the long delay in deciding the detailed development plan was illegal. The lawsuit was withdrawn on the condition that if the coexistence agreement failed by the end of August 2018, the detailed development plan would be decided in the first half of 2019. However, following the directive of Seoul Mayor Park Won-soon that all surrounding markets must reach coexistence agreements, the project was again put on hold. The atmosphere changed after the Board of Audit and Inspection pointed out that "Seoul City is unjustly delaying the process." At the end of last year, the Board notified Seoul City to "promptly carry out the decision on the detailed development plan for the Sangam Lotte Mall special planning district." Seoul City has yet to make a decision. Lotte Shopping plans to proceed with urban planning and development permits soon but is expected to adjust the pace due to the ongoing COVID-19 pandemic.

The third phase of the Gimhae Tourism Distribution Complex development project is also uncertain. Last year, Lotte Shopping expressed its intention to complete the mart, hotel, and resort within the Gimhae Tourism Distribution Complex by 2022, ahead of the National Sports Festival in Gimhae. However, the investment of approximately 270 billion KRW is a burden for Lotte amid the crisis.

The Gimhae Tourism Distribution Complex project began when Lotte signed an agreement with Gyeongnam Province in 1996. Lotte completed the first phase by July 2005 with the construction of the Agricultural and Marine Products Center and by December 2008 with the outlet and logistics center. The second phase ended with the outlet expansion in June 2013 and the water park completion in June 2015. The third phase involves building six facilities?including a theme park, hotel, condo, sports center, employee dormitory, and mart?on a site of 305,000㎡ in the Jangyu area of Gimhae City. While the swimming pool in the sports center has been completed, the other facilities remain stagnant.

While Lotte Shopping is postponing offline new business investments, it is accelerating the online shopping mall 'Lotte ON' business. Lotte ON is an integrated online shopping mall encompassing Lotte's distribution affiliates. It first integrates department stores, marts, supermarkets, and LOHBs, followed by home shopping and Hi-Mart. Lotte plans to utilize data from 39 million customers to integrate and analyze all customer product behavior information, combining the strengths of offline and e-commerce to provide personalized services to each customer. A Lotte official stated, "We are only slowing down the pace of offline new businesses, but these projects are still ongoing."

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