Category: General

The largest South Korean retailers, faced with cut-throat competition in the rapidly saturating domestic market, are turning their attention to overseas markets in conjunction with small and mid-sized businesses to secure a new growth driver.

The country’s three major retail conglomerates – Shinsegae Group, Lotte Group and CJ Group – are targeting to sell more of their ‘private brand’ products or help small and medium-sized enterprises (SMEs) promote their products both in emerging and developed markets, they said.

Of the three, Shinsegae’s Emart, the nation’s largest discount store chain by sales, appears to be the most aggressive player given its latest moves and announcements.

On Wednesday, Emart outlined its 2016 plan not only to increase shipments of its products to overseas branches in China and Vietnam but also to supply them to local retail companies in the US, Europe and Oceania.

“We have set an ambitious target of US$20 million in overseas earnings this year, sharply up from $1.72 million the year before. What we earn outside the country still accounts for a tiny portion of our overall sales. But we expect it to grow over time,” Emart spokeswoman Hur Chae-jeong said.

For all of 2015, Emart saw its net profit jump 57 per cent to 455.9 billion won ($374 million) from 290 billion won a year earlier. Sales rose 4.1 per cent to 15.3 trillion won from 14.7 trillion won during the same period.

The dominant discount store company seeks to fill more than 40 per cent of its total products to be exported with price-competitive PB products. In Korea, in partnership with SMEs, big retailers provide ‘less-recognised’ private label products to customers at lower prices compared to existing brand names.

Moreover, Emart signed an initial agreement with the Korea Trade-Investment Promotion Agency (KOTRA) in November to help SMEs find ways to export their products. The move was in line with the government’s broad efforts to support them amid falling exports.

Exports have been on a losing streak over the past 14 months, posting a 12 per cent on-year decline in February at $36.4 billion, according to government data.

Lotte Department Store and CJ O Shopping, the nation’s biggest department store chain and home shopping channel by sales, respectively, have taken similar moves to go overseas.

Lotte said Thursday it had arranged meetings between Korean SMEs and their Vietnamese and Indonesian counterparts in those countries to help them find bilateral business opportunities there.

“The Korean SMEs supply their products to our department store chains. If they successfully enhance their brand awareness among overseas customers, it will lead to an increase in sales. So we will jointly conduct a market survey with the SMEs and offer them a variety of support programs,” a Lotte spokesman said.

Lotte currently operates department store outlets in Vietnam, Indonesia, Russia and China.

CJ O Shopping said it has partnered with Kotra to help Korean SMEs advance into Latin American markets on top of its current China and Southeast Asian markets.

“In June last year we set up a joint venture with Mexico’s main broadcasting company Televisa to sell Korean products through a local home shopping channel. We will sign such partnerships with other Latin American countries in coming years,” CJ spokesman Hong Seok-woo said.

CJ O shopping is in talks with daily deals website operator Groupon  and US retailer Walmart Stores to have Korean products available in their online shopping malls, Hong said.

CJ has signed with 10 countries, largely in emerging markets, to sell Korean goods through local home shopping channels.

“We are seeing a burgeoning demand for Korean beauty and fashion products in Latin America helped by the boom of ‘hallyu,’ or the Korean wave, there,” he added.