In the Untact Era, 'Emart' Draws Attention... Capa Expansion Completed

by Keum Boryeong

Published 15 Apr.2020 15:10(KST)

The appearance of Emart Seongsu Branch (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Boryeong] Emart is analyzed to have completed preparations for the non-face-to-face (untact) consumer market.

According to Hana Financial Investment on the 15th, Emart officially started operating the Gimpo 2nd Logistics Center in February. Through this, it became possible to ship more than 70,000 units per day from a total of three logistics centers managing 20,000 to 30,000 stock keeping units (SKUs). Emart's total SKUs were previously about 60,000 to 80,000. Including the offline store PP (Picking & Packing) centers, it became possible to ship 120,000 units.

Park Jongdae, a researcher at Hana Financial Investment, explained, "Emart Mall sales alone can generate 160 billion KRW per month. Among these, food accounts for 75%, and fresh food is 35%." He added, "The largest food online delivery fleet in Korea consists of 2,500 consigned vehicles, mostly refrigerated trucks. Production capacity has more than doubled compared to 2018."

Emart's consolidated operating profit for the first quarter is estimated at 58 billion KRW, a 22% decrease compared to the previous year. Despite strong performances from specialty stores, Traders, and Emart24, the burden of increased costs due to the full-scale launch of the SSG.com business is expected to continue throughout the first half of the year. The existing store growth rate of discount stores is expected to decline by 2.4% compared to the previous year, making it difficult to overcome fixed cost increases such as labor costs. Considering the sluggish hotel business and Shinsegae Food, a decline in profit is inevitable.

However, looking at the entire year, operating profit is estimated to increase by 37% compared to the previous year to 207 billion KRW, suggesting a possible turnaround in performance. In the case of specialty stores, more than 30 billion KRW in profit increase is expected due to restructuring of Boots and Pierrot and normalization of No Brand specialty stores.

Researcher Park said, "Emart is the number one company in the food online market share. Since 2018, rapid expansion of the food online market caused capacity shortages, offline sluggishness, and intensified competition difficulties, but in terms of food online infrastructure such as fulfillment, fresh centers, and offline stores, it is unrivaled." He added, "Additional capacity expansion has been completed, and offline restructuring has overcome major hurdles. The existing store growth rate of discount stores is recovering, and the share of online sales is increasing, raising the market share in food distribution. It is necessary to pay attention to Emart as a leading company in the food online market and the 'untact consumption' market."