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Shinsegae’s big picture for future retailing

Takeover of eBay Korea likely to be game changer

By Kim Jae-heun jhkim@koreatimes.co.kr

Not until early this year did Shinsegae start to make its presence again in the local retail market amid the ongoing decline of the supermarket industry.

Shinsegae owns the country’s largest discount store chain E-mart, which enjoyed its heyday until the mid-2010s. However, with the appearance of e-commerce firms like Coupang, people started to shop online and the outbreak of COVID-19 boosted the transition to digital platforms faster than ever.

Vice Chairman of Shinsegae Chung Yong-jin quickly took action to pull out businesses running into the red and declared in January that he will make 2021 a “winning year for Shinsegae.”

“This year could be the best opportunity for Shinsegae Group when the retail market is going through a drastic reshuffle affected by COVID-19. We will not play a losing game,” said Chung through his New Year’s address delivered online.

This year could be the best opportunity for Shinsegae Group when the retail market is going through a drastic reshuffle affected by COVID-19. We will not play a losing game.

Sports marketing

The vice chairman started by taking over a local professional baseball team SK Wyverns on Jan. 26, investing a total 135.2 billion won.

Chung has been showing a strong will to create a culture complex that is beyond a simple shopping mall. When he opened Shinsegae Starfield in Hanam, Gyeonggi Province, in 2016, Chung said he will develop the shopping complex into a theme park like Everland or a baseball stadium.

He acted at least somewhat in line with his word and established a new baseball team named SSG Landers in Incheon. In the following April, he opened a Starbucks store and introduced special goods in an exclusive promotion with the baseball team. Starbucks Korea is an equal joint venture between E-mart and Starbucks headquarters that was launched in 1990. E-mart runs the coffee shop chain in Korea.

Last month, Shinsegae opened its No Brand Burger restaurant at the baseball stadium. No Brand is a private brand launched by Chung and the sales of No Brand Burger in Incheon increased by 11 percent just in May, on the back of Chung’s sports marketing.

The vice chairman is also creating synergy between his retailer and the sports team. E-mart ran the largest sale promotional event for the first half in April and named it after the Landers. A month later, SSG.com, an online subsidiary of E-mart, gave out 10,000 won discount e-coupons to those who spent over 20,000 won at Landers Field.

Chung is also launching craft beers named after star players of the Landers in collaboration with E-mart’s convenience store brand E-mart 24. E-mart 24 has already registered trademark rights with the baseball players name Choo Shin-soo, Choi Jeong, Jamie Romak and Choi Joo-hwan in May.

Overseas businesses

Shinsegae is taking its overseas business seriously too. Shinsegae Group’s venture capital firm, Signite Partners, invested in Grab in February. Grab is a company that is referred to as “the Uber of Southeast Asia,” which started as a mobility firm in 2012. It now operates businesses in dining, food delivery and financial services.

Last July, Chung traveled to the United States to study the retail business there. He met with Good Food Holdings CEO Neil Stern, a former retail consultant at an American firm who has experience with Walmart International’s M&A deal in the past.

E-mart acquired Good Food Holdings in December 2018 for 307.5 billion won.

Apart from Good Food Holdings, Chung is planning to open PK Market in the United State within this year. PK Market is an Asian food concept store that will sell Asian food ingredients and home meal replacement products.

Strategic alliance with Naver

When Coupang went public on the New York Stock Exchange in January, Chung quickly visited Naver to establish a strategic alliance with the IT giant. In March, Shinsegae signed a deal for business cooperation with Naver and exchanged 250 billion won in shares.

Through the deal, Shinsegae has agreed to provide its retail channels and logistics center, while Naver will provide its online platform.

Shinsegae Department Store is taking part in this deal by selling its luxury goods and cosmetics products via Naver’s shopping platform. The absence of many high-end fashion brands has been pointed out as a major weakness of Naver Shopping until now.

The biggest deal that Shinsegae is about to face is its takeover of eBay Korea, the third largest e-commerce firm here.

Shinsegae Group is reportedly in talks with eBay headquarters to acquire an 80-percent stake in the Korean branch for 3.5 trillion won.

Naver had plans to take part in this bid together with Shinsegae at first, but the IT firm decided to drop out in the end.

Acquiring eBay Korea will instantly put Shinsegae’s online retailer in third place in the local market. Ebay Korea currently holds a 12 percent market share, which is only 1 percentage point less than Coupang. Shinsegae Group’s SSG.com only holds a 3 percent market share.

However, retail industry experts have a negative outlook on Shinsegae’s takeover of eBay Korea.

“I think Shinsegae is spending too much to acquire eBay Korea. Its sales price is too expensive and I don’t know how Chung will create synergy between SSG.com and eBay Korea. They are both e-commerce firms but different in that eBay Korea is an open market service operator. SSG. com sells products of other Shinsegae retailers like Shinsegae Department Store, E-mart and Shinsegae International. It will be hard to combine the firms,” an industry source said.

Another source said Shinsegae is trying to give momentum to its online retail business and acquiring eBay Korea will help increase its market share in the short term.

“However, eBay Korea has no great merit in the long-term. I don’t know why Shinsegae is buying the American e-commerce firm. The company has neither its own logistics center nor strong marketing,” the source said.

Analysis

en-kr

2021-06-24T07:00:00.0000000Z

2021-06-24T07:00:00.0000000Z

https://ktimes.pressreader.com/article/281814286829656

The Korea Times Co.