Shifting their focus away from China, leading South Korean retailers are speeding up their expansion into Southeast Asian nations as part of efforts to find new growth engines, industry sources said Thursday.
South Korea’s second-largest retailer Shinsegae Group, which opened its discount store in Shanghai in 1997 for the first time as a local retailer, has reduced the number of stores in China to 16 from 27 over the last two years due to their cumulative losses, according to the sources.
E-Mart Co., the group’s discount chain operator, runs nine stores in Shanghai, five in Tianjin, one in Wuxi and one in Kunshan in the eastern part of China. The company estimates it lost some 94 billion won ($87 million) in China in 2011.
“We will expand our presence in the western and northern part of China by changing our strategy,” an E-Mart official said.
With the reduction of its stores, E-Mart is scurrying to tap into the Vietnamese retail market. With the aim of opening its first Vietnamese store in Hanoi by end-2013, the company is in final talks with Vietnam’s 7th largest conglomerate U&I Group.
“We tried to make inroads into Southeast Asia by making the Chinese market our springboard, but now we believe that the Southeast Asian market is a priority over China,” a Shinseage Group official said.
Lotte Shopping’s conditions in China are not significantly different from Shinsegae, the sources said.
Lotte said in June that it will dispose of its first Chinese department store by early next year. The department store in Beijing has been losing money since 2008 when it started its business.
The Beijing store lost 17.2 billion won in 2008, 34.5 billion won in 2009, 33.6 billion won in 2010 and 28.1 billion won in 2011, according to its annual report.
In a bid to reduce its losses in China, Lotte overhauled its original strategy by opening large-scale shopping mall complexes instead of department stores. It opened two shopping malls in Tianjin, and plans to open two additional shopping malls in Weihai and Chengdu in April and May next year.
Lotte Shopping is also setting its sights on the Southeast Asian market, with plans to open a department store in Jakarta, Indonesia in May 2013 and in Hanoi, Vietnam in 2014.
The retailer’s discount chain operator Lotte Mart Co. is aggressively pushing to expand its reach in China, Indonesia and Vietnam. However, the company’s loss in China this year is expected to rise nearly two-fold compared with 24 billion won in 2011.
Lotte Mart has 100 outlets in China, 30 in Indonesia and two in Vietnam. The company plans to open two outlets this year and two additional stores next year in Vietnam.
“Our sales are forecast to grow 7 percent in China with those in Indonesia expected to rise about 14 percent,” said a Lotte Mart official, adding its sales growth in Vietnam are predicted to reach the 10 percent range.
Along with local retail giants, South Korea’s home-shopping companies including GS Home Shopping Inc. and CJ O Shopping Co. are rushing to enter Southeast Asian countries.
CJ O Shopping started its business under the name of SCJ TV Shopping in July 2011 in Vietnam and grabbed 64 percent share of the country’s home-shopping market. GS Homeshopping launched its business in Thailand in November last year, before providing its services in February of this year in Vietnam and in July in Indonesia.
(Yonhap News)
