Shinsegae Group Chairman Chung Yong-jin has unveiled ambitious plans to expand the group’s hypermarket footprint, just a day after South Korea’s second-largest hypermarket operator Homeplus Co., filed for court protection amid a slowdown in the offline retail sector.
Marking his first year at the helm of the retail giant, Chung pledged on Wednesday to open three new outlets for Shinsegae’s flagship E-Mart Inc. this year, with three more planned by 2027. E-Mart will securing more than five new sites for E-Mart stores.
Adding a fresh momentum to its expansionary strategy, E-Mart turned a profit of 41.7 billion won ($30 million) in 2024, with sales dipping 1.5% to 29.0 trillion won. However, its net losses widened by 205.9% on-year to 573.4 billion won.
Shinsegae is also looking to grow its discount chain Traders to cater to consumers seeking a bang for the buck amid high inflation.
It is revamping E-Mart store interiors as well following the hard discount store model used by German discount supermarkets Aldi and Lidl. The first such location is set to open in eastern Seoul in the first half of this year.
“The key is to make people want to visit offline stores,” said a Shinsegae official.
STARBUCKS
Shinsegae will continue its expansionary strategy for Starbucksl. This year, more than 100 new Starbucks locations are slated to open, including special concept stores at scenic tourist destinations and historic sites. Shinsegae owns 67.5% of Starbucks’ South Korean operations.
Despite its bold growth ambition, Shinsegae faces mounting pressure to restore profitability across its businesses.
Chairman Chung has already moved to overhaul the group’s leadership, replacing senior executives at underperforming affiliates in a bid to revive struggling operations.
The group’s turnaround efforts are also focused on e-commerce and its flagship Shinsegae Department Store business.
Gmarket, which Shinsegae acquired from eBay in 2021, is set to launch a joint venture with Alibaba this year in an effort to drive growth and leverage global expertise.
In 2024, Shinsegae Inc.’s operating profit fell 25% to 479.5 billion won, despite a 3.4% increase in sales. Net profit tumbled 43.5% to 176.2 billion won.
To improve margins at its grocery-focused offline stores, Shinsegae has been consolidating purchasing operations across E-Mart, its supermarkets, and warehouse clubs since last year, allowing the group to source products in bulk at lower prices.
SSG.COM, Shinsegae’s online shopping platform, is also pursuing cost efficiencies by outsourcing its logistics operations to CJ Logistics Corp.
OWNERSHIP STRUCTURE
Meanwhile, Shinsegae Group may undergo an ownership restructuring, which would include Chung’s mother Lee Myung-hee selling her 10% stake in Shinsegae Inc.
Alternatively, she may transfer her stake to either Chung or his sister Chung Yoo-kyung, who oversees the group’s hotels and online business, some of which overlap with her brother’s operations.
Shares in E-Mart have gained about 30% since the start of the year, with Shinsegae’s share price up 18%.
By Jae-Kwang Ahn
ahnjk@hankyung.com
Yeonhee Kim edited this article.
