When Will the Effect of Shinsegae Integrated Membership 'Universe' Be Seen?

Q3 Emart Sales Growth 'Lackluster'
Han Chaeyang's Profitability Enhancement Strategy 'In Focus'

Shinsegae Group's integrated membership program, 'Shinsegae Universe Club,' has been launched for over four months but has yet to show significant results. This is because the third-quarter sales, which could provide a short-term indication of the launch effect, were not as large as expected.

According to the Financial Supervisory Service's electronic disclosure system on the 18th, Emart's provisional separate net sales from July to September amounted to 4.0735 trillion KRW, a 2.15% decrease compared to the same period last year (4.1611 trillion KRW). Although there may be slight differences at the time of the official earnings announcement, it is expected to show a slight decline compared to last year. By business division (discount stores, Traders, specialty stores), the discount stores recorded negative growth, with existing store growth rates in August and September retreating by 0.8%.

Previously, Shinsegae Group launched the Shinsegae Universe Club, involving six affiliates: Emart, Shinsegae Department Store, Shinsegae Duty Free, Starbucks, SSG.com, and Gmarket. The ambition was to provide integrated benefits by combining online and offline affiliates. The plan was to attract users of the online open market Gmarket to offline stores like Emart and Shinsegae Department Store, or to enable loyal Starbucks customers to enjoy online shopping through SSG.com. Considering that more than 100 days have passed since the launch of the Shinsegae Universe Club, the sluggish performance of the discount stores is a disappointing aspect.

Shinsegae Group has not yet disclosed the number of Shinsegae Universe Club members. However, from the perspective of the distribution industry, it appears that the number of subscribers has not increased exponentially. An industry insider commented, "For the number of customers to increase, membership benefits need to be clearly visible, but considering the initial noise around the Universe Club, this aspect is regrettable," and added, "In the case of the open market, competition with Naver Membership makes it difficult to increase the number of subscribers." Shinsegae Group explained through membership performance data released two months ago over 50 days that integrated users are increasing. Emart and Starbucks have 20-40% of their membership consumers who joined through other affiliates."

If the membership's sluggishness is an unsatisfactory point, the long holidays in the third quarter seem to have slowed Emart's growth. The long holidays acted as a hindrance. Kim Myung-joo, a researcher at Korea Investment & Securities, said, "The existing store growth of discount stores was weaker than expected because domestic travel abroad increased significantly during the golden holiday period in September," adding, "The floating population in the distribution industry decreased."

Emart's overall performance, including subsidiaries, is estimated to be similar to or slightly improved compared to last year. This is because major subsidiaries have started profitability improvement efforts. According to estimates from more than three securities firms, Emart's consolidated sales and operating profit are expected to grow by 2% and 3%, respectively, year-on-year, reaching 7.8629 trillion KRW and 103.9 billion KRW. In fact, Starbucks Korea is expected to improve profitability due to last year's recall cost reflection, and Gmarket and SSG.com reduced their deficit by scaling back promotions. However, Shinsegae Construction remains a wild card. Since posting an operating loss in the fourth quarter of last year, it has continued to incur losses, and there is a view that the deficit in the third quarter could widen compared to the second quarter (-30 billion KRW).

As performance improvement is delayed, attention is focused on the strategy that Han Chaeyang, the newly appointed head of Emart, will present. Being from the strategy office and specialized in corporate restructuring, it is expected that strengthening profitability will be prioritized. Given that the head of Emart's merchandise division will concurrently serve as the head of Everyday and Emart24, it is predicted that cost reduction will be pursued through joint merchandise procurement. An Emart affiliate official hinted, "Han is known within the group as a 'financial expert' with deep experience in this field," adding, "The turnaround to profitability at Chosun Hotel was highly evaluated within the group, so there will likely be internal expectations for performance improvement."

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