Lotte Shin Dong-bin "Abandon Success Experience, Execute Largest Ever Restructuring"

Lotte Group Abandons Success Experience... Focus on Restructuring
200 Unprofitable Stores to Be Closed Within the Year
Omni-Channel Strategy in Full Swing... Focused Investment in Digital
Linking Infrastructure of Over 10,000 Convenience Stores

[Asia Economy Reporter Minyoung Cha] Shin Dong-bin, Chairman of Lotte Group, has directly announced his intention to embark on a 'restructuring' to completely reorganize Lotte Group, which has been developed mainly around offline businesses. In particular, he plans to focus investment on the digital sector to fully implement the 'omni-channel strategy' that links online and offline.

In an interview with the Japanese media Nihon Keizai Shimbun (Nikkei) on the 5th, Chairman Shin said, "I will abandon all successful experiences in physical stores," and announced the largest-ever store restructuring.

The plan is to close about 20%, a total of 200 unprofitable stores among large supermarkets (super) and specialty stores (yangpanjeom), and department stores owned by the core subsidiary Lotte Shopping within this year. For supermarkets, 20% of the 536 stores, mainly large stores, will be closed; for specialty stores, about 20% of the 591 stores; and for department stores, 5 out of 71 stores will be shut down.

Nikkei explained that Lotte's pillar is its distribution business in Korea, accounting for about 40% of the group's total sales, but due to prolonged consumption stagnation in the Korean market and fierce competition with internet shopping malls, Lotte Shopping's operating profit, the core of Lotte Group, has decreased to one-third over the past five years.

Chairman Shin stated, "We will unify the internet business and create a structure where all products can be received at nearby (Lotte) stores." Regarding the personnel changes in January, where 40% of the CEOs of group affiliates were replaced with younger executives, he explained the background by saying, "Many people still thought centered on offline store operations while verbally calling for digitalization."

He also plans to fully implement the omni-channel strategy aimed at increasing sales by strengthening the connection between offline stores and the internet. He expressed the intention to utilize the convenience store infrastructure, which currently has more than 10,000 locations, by promoting digitalization.

Regarding Coupang, considered a competitor in the online market, he viewed negatively, saying, "We will not compete with companies that incur losses of over 100 billion yen annually and are compensated by shareholders."

He also revealed plans to expand investments in the hotel and chemical sectors. He said, "In the hotel sector, including mergers and acquisitions (M&A), we will expand to a global system of 30,000 rooms, double the current capacity, over the next five years." He added, "In June, we will open a luxury hotel in Seattle, USA, and are also considering one in the UK. In Japan, there are only Lotte Arai Resort in Niigata Prefecture and a hotel in Tokyo Kinshicho, but over 3 to 4 years, we will actively increase hotels in Tokyo and other areas. We are also considering resort hotels. We will avoid Kyoto, where competition is intense."

Regarding the chemical sector, he mentioned that many Japanese companies have excellent technology but have not expanded globally, and expressed the intention to consider acquiring Japanese companies. He said, "We built an ethylene plant in Louisiana, USA, last year, and this year we will invest about $1 billion more to increase production capacity by 40%, from 1 million tons to 1.4 million tons annually," adding, "We will also consider acquisitions in the chemical sector in Japan."

Chairman Shin explained that since low birthrate and aging are progressing in Korea at a faster pace than in Japan, growth cannot be expected from the domestic market alone, making global market development a very important task.

Regarding the China business, he said, "The consumer goods business in China, including confectionery, supermarkets, and department stores, has become difficult," and added, "We will sell the two department stores still in operation. It is difficult to consider re-entry for the time being. Factories handling automobile parts will continue."

Expressing concern about the economic slowdown caused by the COVID-19 pandemic, he said, "In Korea, demand for department stores, which had many inbound customers, has completely disappeared, and the number of visitors to theme parks and cinemas has dropped to less than half," but added, "However, supermarkets selling daily necessities are performing well."

He continued, "With increasing global economic instability, we will promote shifting our business focus to developed countries. Over the past 20 years, Southeast Asia such as Vietnam and Indonesia, Central Asia, Russia, and Eastern Europe have been the center of our business. Although the business expanded, there have been losses recently due to currency depreciation."

Regarding the listing of Lotte Japan on the stock market, he said, "The target was March 2021, but considering stock prices and the economic situation including COVID-19, it may be postponed by 6 months to a year," adding, "There is no need to rush, but once the company reaches a certain scale, it should be listed as a public institution (gonggi, an institution affecting society as a whole)."

He also said, "There is no longer any problem" with his older brother Shin Dong-joo, Chairman of SDJ Corporation (former Vice Chairman of Lotte Holdings Japan), with whom he had a management dispute. Shin Dong-joo had pushed for listing Lotte Japan within the next two years and had a management conflict with Chairman Shin Dong-bin.

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