Korea’s Discount Retail Fight Heats Up

Shinsegae E-mart, which acquired American Wal-mart stores in Korea, has consolidated its lead as the largest discount store chain in Korea, while other companies are fiercely battling for the number two spot. Contenders for second place, such as E-land, which bought the French chain Carrefour’s operation in Korea, Samsung Tesco’s Home Plus, and Lotte Mart are putting forward aggressive business strategies to seize second place.

E-land Takes Down Carrefour Signs Earlier Than Expected—

E-land has selected a new name for the 32 stores that belonged to Carrefour Korea, which it acquired in April of this year, and will officially announce the new brand name as soon as June 12 or 13.

An E-land official said, “The new brand will have an international image that will not only be used in Korea, but also be used in chain stores abroad such as in China.”

On May 2, E-land requested the Fair Trade Commission (FTC) to approve the merger, and results will be announced in late July. Therefore, for E-land to actually use the new brand it will have to wait for more than a month.

Nevertheless, E-land explains that it decided to reveal the new brand soon, because consumers’ negative image about Carrefour continued to increase, and they wanted to show that E-land plans to seriously engage in the discount store business.

Furthermore, E-land will start renovating the Carrefour stores in the Seoul metropolitan area as soon as the merger is approved by the FTC. It plans to renovate four stores every month and finish renovating all the stores by the summer of next year.

“We plan to open 60 discount stores and 60 fashion outlet stores until 2010, and hence have a total of 120 discount stores. Through this we will actively pursue to become the leader of discount store market,” said E-land officials.

Samsung Tesco Concentrating in Protecting its Current Status—

Currently in second place after E-mart, Chairman Lee Seung-han of Samsung Tesco held a “Town Meeting to Explain Vision” at the company’s headquarter in Gangnam-gu, Seoul, on June 9, where about 500 executives attended, and announced, “We will take first place by 2012 by raising our sales over 12 trillion won.”

In order to achieve this goal, Samsung Tesco has already bought land to build 50 new stores, and has decided to merge and acquire any suitable company.

Chairman Lee said, “When we first started in 1999, we were in 10th place, but the reason we jumped to second in just merely three years is because we changed the concept of discount stores from simple shopping places to a new place with cultural centers and other beneficial facilities. We will continue to expand such activities.”

Other companies view Chairman Lee’s meeting as an act to prevent internal unsteadiness, in a situation where Shinsegae took Wal-mart Korea, and newcomer E-land acquired Carrefour.

Lotte to Find Breathing Space in Foreign Market—

Lotte Mart is not only aggressively expanding stores in Korea, but also actively seeking to expand into foreign markets.

Just last month it opened three new stores each in Busan, Ulsan and Yeosu, and plans to open another additional nine stores by the end of this year, and hence expand to 55 stores.

Recently, it also created a new “Foreign Market Expansion Team” in order to advance into countries such as Russia, Vietnam and India.

In particular, in Vietnam, it is working under a plan to open stores within one or two years by signing a license contract with either the Vietnamese government or a local company sometime in the second half of this year.

Jae-Seong Hwang jsonhng@donga.com kimhs@donga.com