Lotte Hi-Mart Accelerates Store Reduction... Seeking Solutions for Poor Performance

20 Stores Closed This Year Alone... Continuous Expansion of Megastore
Customer Attraction with Heart Market... Strengthening PB HiMade

[Asia Economy Reporter Lim Chun-han] Lotte Hi-Mart is accelerating the reduction of its stores. The company aims to close small stores, which are cited as the main cause of losses, and strengthen efficiency by focusing on mega stores, which are large-scale outlets.

According to Lotte Hi-Mart on the 15th, the number of stores as of the third quarter this year was 407, down 20 from 427 at the end of last year. They plan to close about 10 more by the end of the year. As CEO Hwang Young-geun of Lotte Hi-Mart announced plans to reduce more stores next year, the pace of store closures is expected to accelerate further.

On the other hand, mega stores have been continuously expanding since the opening of the Jamsil branch in early 2020. As of the third quarter, 22 mega stores are in operation. Mega stores are premium outlets where customers can experience various domestic and international premium brands, and they also offer diverse cultural spaces such as a one-person media zone, Apple A/S center, interior consultation, and cafes. The seven stores converted to mega stores this year saw sales increase by 160% compared to the same period last year from their opening until last month.

Through Heart Market, a used goods trading service based on nationwide stores, Lotte Hi-Mart is targeting the MZ generation (Millennials + Generation Z) to attract customers. Since the service opened in October last year, about one million users have visited, and since August this year, it has been restructured into a specialized used goods trading platform for gaming products. As a result of events for registering gaming products and expanding community game content, the number of posts in the second half of the year increased about 19 times compared to the first half.

Exterior view of Megastore Gwanggyo Lotte Outlet. (Photo by Lotte Hi-Mart)

The company is also strengthening its private brand (PB), Hi-Made. This strategy aims to respond to e-commerce competitors with price competitiveness, attract new customers, and improve profitability. Hi-Made’s sales have grown at an average annual rate of 25% from 2016 to last year. From January to October this year, sales increased by 30% compared to the same period last year.

Hi-Made handles everything from product development to quality verification, mass production, and operation directly, making its products up to 40% cheaper than general home appliance brands. Some stores operate brand zones exclusively for Hi-Made products. Hi-Made started with 30 items in 2016 and expanded to 80 items last year. Currently, it sells 85 items and about 300 products, with plans to increase to around 100 items within the year.

A Lotte Hi-Mart official said, "We will further strengthen efforts to improve our business structure through selection and concentration to improve performance. We will nurture excellent home appliance brands and expand the operation of lifestyle product categories such as healthcare, camping, and pet appliances, as well as global brands. We also plan to continuously develop differentiated private brand products."

Meanwhile, Lotte Hi-Mart’s consolidated operating profit for the third quarter was 686 million KRW, down 98.7% compared to the same period last year. Sales were 873.86 billion KRW, down 16%, and the net loss was 370.295 billion KRW.

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