Lotte Vice Chairman Kang Hee-tae Makes Bold Move in E-commerce Business to Restore 'Distribution Powerhouse' Status

[People 人] eBay Korea and Junggonara Acquisition Officialized
External Experts Recruited for Lotte ON ... Distribution Innovation Plan Unveiled

[Image source=Yonhap News]

[Asia Economy Reporter Jo In-kyung] "We will not simply focus on strengthening digital capabilities to keep up with the rapidly changing times. We will achieve business innovation based on digital transformation across the entire business."

Kang Hee-tae, Vice Chairman and CEO of Lotte Shopping, officially announced the acquisition of eBay Korea for 5 trillion won and also moved to acquire shares in Junggonara. He publicly revealed plans to bring in external experts to fill the vacant head of the 'Lotte ON' business division and lead innovation at Lotte ON. This reflects Vice Chairman Kang's determination not to hesitate in improving the company's structure to continue the legacy of Lotte as a 'distribution powerhouse' amid the rapidly changing online retail environment.

Emphasizing Commitment to eBay Acquisition

On the morning of the 23rd, at the shareholder meeting held at Lotte Big Market Yeongdeungpo branch in Seoul, Vice Chairman Kang responded to questions about the acquisition of eBay Korea by saying, "We have sufficient interest." This is the first time a senior Lotte official has publicly expressed a position on the eBay Korea acquisition.

Lotte Shopping launched the integrated e-commerce platform Lotte ON last year, but it has struggled. Although the online shopping market grew rapidly after the spread of COVID-19, Lotte Shopping's e-commerce sales declined and losses widened. Competitors like Coupang secured large-scale funds through a U.S. stock market listing, and Shinsegae strengthened alliances by exchanging shares with Naver.

For Lotte, this is a golden opportunity to increase its e-commerce market share from the current 4% range to 16%, making it impossible not to stake everything on the acquisition battle.

Vice Chairman Kang also apologized for the poor performance of Lotte ON, the integrated online mall of Lotte Group's distribution affiliates. He said, "We experienced many trial and errors, including system instability at the early stage of the launch, and did not achieve the expected results," adding, "We will appoint external experts to strengthen capabilities."

Surprise Investment in Junggonara Acquisition

In the afternoon of the same day, Lotte Shopping also officially announced the acquisition of Junggonara, the country's number one online secondhand trading company. In partnership with Eugene Asset Management and others, Lotte Shopping will participate as a financial investor in a contract to acquire 95% of Junggonara's shares. Out of the total transaction amount of 115 billion won, Lotte Shopping will invest about 30 billion won.

Entering the secondhand trading market is Vice Chairman Kang's bold move. In particular, Lotte Hi-Mart has included wholesale and brokerage services for used products as new business objectives, preparing a unique e-commerce service for Lotte targeting the home appliances and digital markets.

In the distribution industry, this is interpreted as Lotte setting and implementing a bold e-commerce business strategy, conscious of competitors like Coupang and SSG.com. An industry insider said, "By combining Lotte Group's greatest strength, its offline platform, with distribution and logistics capabilities, various synergy effects can be expected through the acquisition of Junggonara."

Closing Unprofitable Stores, Expanding Restructuring

Vice Chairman Kang is also taking charge of restructuring to restore profitability at Lotte Shopping. Early last year, he announced a restructuring plan to close 200 unprofitable stores out of 700 offline stores within five years, and by the end of the year, over 110 stores were closed. This year, a similar level of store sales and closures is expected.

Personnel restructuring such as voluntary retirement and honorary retirement is also ongoing. Early this year, Lotte Mart accepted voluntary retirement applications for employees with more than 10 years of service across all ranks from staff to department head for the first time since its founding, and most distribution affiliates including Lotte Food, Lotte Asahi Liquor, Lotte Hi-Mart, Lotte GRS, and Lotte Hotel also conducted voluntary retirement programs.

These efforts to slim down the company are expected to lead directly to visible profit improvements if the synergy between online and offline competitiveness across department stores, outlets, marts, and supermarkets is realized.

Vice Chairman Kang stated, "Although the department store division struggled last year due to the COVID-19 crisis, with recent adjustments in social distancing levels and the spread of revenge consumption, consumer sentiment is recovering, so we expect a performance rebound this year." Regarding Lotte Mart's business, he added, "We expect to turn a profit in the near future," emphasizing, "We will strengthen competitiveness by securing online logistics capabilities at nationwide store hubs such as Smart Store, enhancing the core grocery product category, and reorganizing store spaces."

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