Emart Twice Hampered by High Inflation, Kang Hee-seok's Team Seeks Solutions from 'Loyal Customers'

2Q Operating Loss of 11.3 Billion KRW, Sales Forecasted at 7.36 Trillion KRW
Key to Overcoming Slump: Loyal Customers, Selective Focus Strategy

Emart is putting all its efforts into securing 'loyal customers' to overcome recent poor performance. By leading with the paid membership 'Shinsegae Universe Club,' CEO Kang Hee-seok is strengthening the online and offline integration he has consistently emphasized since his appointment, while expanding products offered at low prices through cost reduction to make visiting Emart channels a habit for customers.

E-Mart CEO Kang Hee-seok is attending the 'Shinsegae Universe Festival' held at COEX in Gangnam-gu, Seoul on the 8th and answering questions from the press. Photo by Kang Jin-hyung aymsdream@

According to financial information firm FnGuide on the 14th, Emart's consolidated operating loss for the second quarter is expected to continue at 11.3 billion KRW, following a deficit in the same period last year, while sales are projected to increase by 2.95% to 7.3579 trillion KRW. The large discount stores have been hampered by high inflation both internally and externally, and the poor performance of Starbucks Coffee Korea (now SCK Company) is also analyzed to have had an impact.

Due to soaring prices, customer visits to large discount stores did not increase as much as expected in the second quarter. The same-store sales growth rate for discount stores in the second quarter is forecasted to be only 1%. Last year's second-quarter growth rate was 3.8%, and the high base from the previous year also weighed on this year's second-quarter performance. Inflation increased fixed costs for store operations, negatively affecting performance. The performance of large discount stores is also heavily influenced by the number of holidays, and since the number of holidays in the second quarter was the same as the previous year, relative performance improvement through this factor was difficult to expect. Among major consolidated subsidiaries, SSG.com and Gmarket are analyzed to have continued reducing operating losses by refraining from inefficient product promotions. SCK Company is also expected to have suffered poor performance due to continued high cost burdens in the second quarter.

As a listed company, Emart faces two challenges: improving short-term performance and preparing mid- to long-term growth engines. The fundamental solution to these challenges is seen as securing loyal customers, and the company plans to focus all efforts on securing loyal customers in the second half of the year. To improve numbers in the second half, Emart will continue its profitability-first strategy while cutting costs and optimizing stores. Since early April, operating hours have been shortened by one hour to reduce fixed cost burdens. Major store renovations will also continue. Seeing visible effects such as double-digit sales increases after renovations, the company plans to renovate about ten stores this year. The Yeonsu branch, which reopened after renovation in the first half of this year, is estimated to have increased sales by more than 10% in April and May compared to the same period last year.

Last month, the consumer sentiment index rose to 100.7, surpassing the baseline of 100 for the first time in 13 months. This is positive, reflecting strong expectations for easing economic downturn and continued consumption recovery in the second half. However, the impact of high inflation is expected to continue in the second half, so marketing strategies emphasizing low-priced products are likely to persist. The 'The Limited' project, which selects fresh, processed, and household goods each quarter and offers them at the lowest price level, will continue. This approach lowers prices through bulk purchasing, improving distribution processes, advance contracts, and developing new production areas. The fact that the number of holidays is two more than last year is also expected to be actively utilized.

In the mid to long term, the challenge is to increase the number of customers visiting large discount stores, especially Emart. To this end, the paid membership 'Shinsegae Universe Club,' launched last month, will be strengthened, accumulating customer data and focusing on loyal customers as a strategy. The initial effect of the Shinsegae Universe Club is minimal. One month after its launch, both Emart and Shinsegae saw sales decline compared to the previous month and the same period last year. Emart's total sales last month were 1.2826 trillion KRW, down 4.6% from the previous month and 2.3% from the same period last year. During this period, Shinsegae's total sales were 390.3 billion KRW, down 11.0% from the previous month and 3.6% from the same period last year.

However, the company expects a mid- to long-term customer lock-in effect. To achieve this, collaborations will be expanded not only with group affiliates such as Emart24, Shinsegae Food, and Starfield, but also with other sectors including telecommunications, aviation, finance, gaming, and delivery platforms, ultimately aiming to expand customers' time and space occupancy.

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