Shinsegae, one of South Korea’s largest retail groups, has reported its net profit fell 99.8 percent year on year as the Covid-19 crisis effectively shut down the nation’s tourism industry and caused local consumers to stay home.
The conglomerate, whose subsidiaries include E-mart big-box stores, convenience stores, homewares, fashion, beauty and a duty-free retail division, reported a March quarter net income of 1.6 billion won (US$1.3 million) on sales of 1.2 trillion won ($976 million).
With a ban on inbound visitors from Mainland China during part of the period, Shinsegae’s duty-free business was hardest hit by Covid-19. Sales fell 30.5 percent to 488.9 billion won ($398 million) and the division lost 32.4 billion won ($26.4 million). Sales through airport duty-free outlets slumped by 40 percent and of downtown duty-free stores by 21 percent year on year.
The E-mart business, which is also listed and releases its own financial results, had earlier reported an operating profit of 48.4 billion won ($39.4 million) in the March quarter, reversing a loss of 100 million won ($81,000) in the preceding three months. The company said its sales had benefited from consumers moving online and increased grocery demand while people cooked or ate at home instead of dining out.
Sales of 5.2 trillion won ($4.2 billion) were up 13.6 percent year on year.
Shinsegae’s department-store business saw sales fall 11.7 percent. The company’s furniture and homewares chain Casamia saw sales rise 23.8 percent due to network expansion, but additional costs contributed to a more than doubling of its loss to 2.7 billion won ($2.2 million).
Sales at fashion and cosmetics group Shinsegae International fell 11.6 percent, but the division turned an operating profit of 12 billion won ($9.8 million).
South Korean department store franchise Shinsegae has relinquished its claims to the K-pop boy band BTS brand name following a threat of legal action by the band’s representatives.
“We renounce all trademark rights related to BTS,” read a statement from the firm released this week. “Shinsegae supports the activity of BTS, which leads the Korean wave.”
The band has struggled to claim ownership of the brand name since 2013 when it was discovered to have already been registered by Shinhan Corporation as part of a “Back to School” campaign. Shinsegae purchased the brand in 2018 for use in its various product ranges, including apparel.
Shinsegae’s trademark application for the BTS brand was rejected by the South Korean state patent office after the band’s management Big Hit Entertainment filed an objection on grounds of absurdity, given the band’s global popularity. Shinsegae initially appealed the decision.
Shinsegae Department Store, one of South Korea’s leading retailers, said Tuesday that its outlet in Gangnam, an affluent area in southern Seoul, reported 2 trillion won (US$1.7 billion) in accumulated sales last year.
It marks the first time for a single-department store branch to achieve the 2 trillion won milestone, the company said.
Lotte Department Store, another leading player, earlier said its branch in Myeongdong in downtown Seoul generated 1.8 trillion won in sales last year.
Shinsegae attributed its stellar performance to increased visits by foreign shoppers as its Gangnam outlet is adjacent to a number of five-star hotels, including the JW Marriott Gangnam.
Most of the top-buying foreign shoppers were from China, Taiwan and Russia, the company said.
The store also underwent major remodeling in 2016, in a move to provide a better luxurious in-store shopping experience by organizing items based on themes rather than brands.
The country’s three major players — Lotte, Hyundai and Shinsegae — account for about 80 percent of the sector’s sales in the country.
South Korean retail giant Shinsegae is developing a cashier-less grocery-store modeled on the Amazon Go concept.
The brand’s first automated store – to be branded Emart24 – will open at the company’s data centre in Gimpo in Gyeonggi Province as a pilot while the model is refined before being launched in a more high-profile location.
Just like at an Amazon Go, shoppers will be able to select products from shelves and walk out the door, the cost of the goods deducted from their pre-registered payment choice. Entry to the store will be granted by a QR code appearing on the customer’s smartphone and items will be automatically added to a virtual cart as they shop. About 30 cameras inside the store will monitor what items customers take from shelves – and those they put back.
The project is being developed by Shinsegae’s IT department which will oversee the operations, while stock will be managed by Emart24.
“The store will be a ground-breaking testbed where we apply and test various advanced technologies,” Kim Jang-wook, CEO of Shinsegae I&C said. “We plan to operate a store where customers can experience retail technology and enjoy real shopping.”
Technology used in the store will include artificial intelligence (AI), computer vision and cloud point-of-sale systems.
After a trial run with employees which is currently underway, the store will be opened to the public on September 30.
Shinsegae International has launched a new coworking space in Seoul it expects will boost its retail business.
The new 278sqm “Scale Up” space in Cheongdam-dong is targeted at startups in the lifestyle-related industry. With seven offices and meeting rooms, it is loosely modeled on the firm’s earlier coworking space S.I Lab for fashion enterprises.
“Scale Up’s main purpose is not to provide space, but rather to support startups with growth potential,” said Shinsegae International executive director Park Seung-seok. “With our infrastructure, we aim to make a win-win situation for both Shinsegae International and small startups.”
Shinsegae has reserved one of the Scale Up offices for foreign business operators visiting the country. Four other members will pay a monthly fee of KRW1.5 million (US$1280) to use the space, which includes support services such as opportunities to use the company’s retail channels and potential cooperation with Shinsegae brands.
Shinsegae Group will launch a brand new entity that specializes in e-commerce next month in an effort to become Korea’s answer to Amazon. Titled SSG.com, Choi Woo-jung, vice president of Shinsegae’s e-commerce division, will be the CEO. “[Through the new entity], we hope to maintain the existing SSG.com brand and maximize brand power by raising [people’s] awareness of our professionality in the online market,” the company said in a statement.
The latest move reflects Shinsegae’s ambition to become the country’s top e-commerce company by gathering its scattered online businesses.
Shinsegae Group in December spun off Emart Mall and Shinsegae Mall from Emart and Shinsegae. The board of directors in January voted to merge the two new entities.
It has already been running SSG.com as an e-commerce website that offers access to its various online malls, but it is currently only a customer-facing interface, not a company in its own right.
SSG.com’s sales goal for this year is 3.1 trillion won ($2.8 billion), which is 29.1 percent higher than the sales recorded by the online platform last year.
The company hopes to reach its ambition through aggressive marketing, especially on raising the efficiency of delivery services.
It will make a heavy investment on raising the delivery speed by establishing an additional distribution center in Gimpo, Gyeonggi. It will be the third distribution center, and is scheduled to open in the second half of this year.
“With the official launch of SSG.com, we are getting ready to become the country’s top e-commerce enterprise,” said Choi in a statement.
“Instead of just selling goods online, we are also planning to function as a ‘Linker’ by connecting consumers online and offline like [offering them the platform to] share their lifestyles on the internet.”
For many in Korea, Lunar New Year is a time to meet relatives and exchange elaborately-packaged gift sets that could contain anything from fruits and raw meat to cans of Spam. But one side effect to this approach to gift giving is the excessive waste – especially those originating from gift set packaging – which has been brought up as a major concern by Korea’s environment authorities in recent years.
With growing government pressure and awareness about the environmental issues caused by excessive packaging, department stores and grocery franchises are trying to take the lead in adopting greener alternatives this year.
Colored Styrofoam and gel-based ice packs, which are notoriously difficult to recycle, are the first things to get scrapped.
Hyundai Department Store and Lotte Mart have both announced that they are replacing colored Styrofoam in gift sets with a plain white alternative starting from this holiday season. Previously, the companies added color to the material to add visual appeal. Colored Styrofoam materials are difficult to recycle because more money and manpower is required to create new Styrofoam products from them, making them unattractive to recycling companies.
Lotte Mart Thermal Bag
Lotte Department Store is chilling gift sets of meat and fish with ice packs filled with water instead of gel-based ones for the first time this year.
Competitor Shinsegae Department Store is also ditching the hard-to-recycle wooden boxes and cloth wrapping it had previously used to package gift sets. It will use paper boxes instead.
Other retailers are collecting ice packs – both gel- and water-based – and recycling them themselves.
Department store chain AK Plaza said it will collect ice packs from AK Plaza-bought gift sets across all its stores until Feb. 10 for recycling and disposal.
Hyundai Home Shopping is taking it one step further and accepting ice packs regardless of their place of purchase. This year, it teamed up with Gangdong District office in eastern Seoul to install collection bins in 18 locations to allow customers to drop off used ice packs after the holidays.
“We’ve collected ice packs from our online shopping members in the past and decided to install public ice pack collection bins this holiday season,” said a Hyundai spokesperson. “We will send out the ice packs that we collect to our partners in the food industry so they can be reused.”
Lotte Mart is focusing on making gift bags more attractive and practical to encourage customers to use them even after the holidays end.
The thermal bags that come with its beef gift sets now have shoulder straps and a sleek black design, making them practical and user-friendly. While the thermal bags have always been reusable, they were previously covered with large Lotte brand logos and difficult to carry around.
The grocery chain is also going to package more fruit gifts this year in what it calls “recycle boxes.” The boxes, first introduced during last year’s Chuseok (harvest festival) holidays, are made of sturdy paper that can easily be reassembled into mini storage boxes.
“We didn’t register any copyright for our fruit ‘recycle box’ design so that other retailers can also participate in recycling and reducing disposable waste,” a Lotte spokesperson explained.
The businesses’ green initiatives follow the government’s consistent calls to reduce packaging and other waste during the Lunar New Year holidays.
As has become customary every holiday season, the Environment Ministry announced last month that it will work together with local governments to inspect gift sets being sold across retailers in the country and fine violators up to 3 million won ($2,700) if they do not comply with packaging rules.
Current regulations stipulate that gift sets can only be wrapped two times and that the volume of packaging must not exceed 25 percent of the product’s total volume.
Last Lunar New Year, the Environment Ministry fined the manufacturers of 49 products that were in violation of these rules. The total fine combined came to 52 million won ($46,000).
“We have seen a small decline in the number of products that violate excessive packaging regulations over the years,” said an Environment Ministry official in the recycling division. “The participation of companies to reduce packaging and comply with inspection is always a big help.”
Major South Korean travel retailer Shinsegae Group is set to launch an in-house developed cosmetics line, Yunjac, into the duty free channel at its Myeong-dong store in the capital city, Seoul. An ambitious sales target has been set for the brand. The opening on 2 February of an independent Yunjac cosmetics area adds to existing domestic market locations in Jung-gu and Gangnam in Seoul, and Centrum City in Busan. The brand was launched in October 2018.
Fashion, beauty and lifestyle specialist, Shinsegae International, which developed the 42-strong product line, has told The Moodie Davitt Report that it aims to make US$90 million in sales by 2020. Four travel retail exclusive sets are part of the product range.
The duty free exposure will promote Yunjac to a wider audience, with a particular focus on Chinese travellers. A Shinsegae Duty Free spokesman said: “The Myeong-dong store is a trendy shopping place where you can easily experience the world’s most popular brands. We will try our best to be the centre of world beauty. The line is targeting the global market including China.”
Yunjac, which means ‘nature’s masterpiece’, is chiefly built around skincare with some makeup and other smaller segments, also part of the portfolio. It is the result of several years research and preparation by Shinsegae International. The product development was a joint effort with global cosmetics maker Intercos and world-renowned botanical research institute Vitalab.
The manufacturing process involves extracting active ingredients from the best Korean herbs and combining them with state-of-the-art science. The end result is what Shinsegae describes as “the whole plant effect” which is claimed to restores the skin’s natural strength.
Yunjac’s 42 products are priced at around US$30 for cleansing products, US$100 for skincare and US$50 for mother and infant items, according to Shinsegae Duty Free.
South Korean retail giant Shinsegae is launching an independent Yunjac cosmetics store at its Myeongdong duty free outlet. The cosmetics shop, which will open on February 2, retails Asian herb-based skincare products. Launched in October last year, it is Shinsegae’s first in-house cosmetics brand, targeting Chinese millennials. A statement from the company said the opening is ahead of schedule thanks to unexpectedly high demand, with sales exceeding last year’s expectations by a factor of four.
Three Shinsegae Department Store branches currently host a Yunjac outlet, with more stores planned to open within Korea and abroad shortly. It is targeting sales of KRW100 billion (US$89 million) by next year.
South Korean retailer Shinsegae International aims to promote South Korean designer brands through a new online store. The company says ‘Select Shop’ will specialise in South Korean designer brands, on its S.I.Village online shopping portal. Select Shop accommodates 30 designer brands for clothing, bags, and footwear.
“Select Shop will serve as a new channel for South Korean designers as well as for young and sensational new brands, which will also boost the competitiveness of our online shopping mall,” said a Shinsegae International spokesperson.
Shinsegae International said S.I.Village’s high-end reputation is what encouraged many of the designers to join Select Shop.
To mark the grand opening, Select Shop will provide discounts of 5 to 20 per cent on all member products and will give away movie tickets to the first 300 customers to make a purchase on Select Shop.
The website will also be the exclusive distributor for 99 T-shirts designed in collaboration with 99%IS by Bajowoo.
Fortnum & Mason Asia sales are soaring, prompting the UK luxury-food retailer to plan more stores. In Hong Kong, the chain achieved a 55 per cent increase in sales in the year to July, helping it book a sixth consecutive year of double-digit sales and profit growth. Two new stores are now trading in South Korea – in Shinsegae Gyong-Gi and Shinsegae Gangnam – and options in other Asian markets are being assessed. Another new store opened in London.
Global sales for Fortnum & Mason grew 12 per cent, reaching £126 million (US$161 million), while profit soared 26 per cent to £9.6 million. The company is now delivering products to a record 125 markets worldwide from its online sales channels.
Sales at its flagship store in London rose 10 per cent – during a time most department stores in the UK have been struggling to maintain sales growth and profits. Travel retail stores in Heathrow and St Pancras International train station rose 12 per cent.
“This year has not been without its challenges, but we’re proud to report another exceptional trading period,” said Fortnum & Mason CEO Ewan Venters.
“By being faithful to our heritage and pedigree, focusing on the creation of extraordinary products and exceptional service, and delivering our world-renowned products to customers anywhere in the world, I am pleased that we are able to meet the growing demand for quality and impeccably-sourced products.”
He said he was “particularly pleased” with the increased sales of Fortnum & Mason Asia and has great confidence in the two new spaces in South Korea.
Starfield, a shopping and theme park franchise operated by South Korean retail giant Shinsegae Group, has opened the country’s first ‘dog lounges’ for customers and their pets. The dog lounges offer specially designed sofas for pets as well as their owners, restrooms for pets, and dog hooks where customers can temporarily leave their pets when they have to go to the restroom themselves.
The lounge also provides separate resting areas for customers and pets divided by a glass wall. Resting areas for pets have house-shaped sofas, authentic grass floors and restrooms.
“Starfield was South Korea’s first shopping mall chain to allow pets, but we were always aware of the lack of convenience facilities for customers and pets,” said Choi Jae-kyun, operations manager at Shinsegae Property.
“Now, we can proudly present ourselves as a pet-friendly shopping mall that both customers and pets can enjoy.”
South Korean retail giant Lotte opened this week a new premium outlet in Giheung, Gyeonggi Province – the second-largest among its branches nationwide and the latest addition to large-scale malls launched by retailers here in hopes of raising offline sales. Lotte is pinning hopes on the latest outlet’s location, citing three highways and five major roads passing through Giheung.
It aims to attract some 25 million shoppers in and around the region including Yongin, Suwon, Dongtan and Bundang in Gyeonggi Province.
Chung Hoo-sik, an official in charge of the Giheung outlet, said that the shopping mall is geared toward consumers in their 30s and 40s who have children and live in southern Gyeonggi Province.
“We found that 30- and 40-something customers from those areas have strong spending power. To attract them, we put entertainment facilities like an outdoor playground and entertainment zones for their kids (inside the outlet),” said Chung at a press conference on the launch.
Built on 150,000 square meters of land, Lotte’s premium outlet in Giheung features 300 brands and is equipped with 3,000 parking lots. It is Lotte’s sixth premium outlet.
The outlet has an indoor surf shop, Flow House, spanning 490 square meters. Lotte said it also houses Asia’s biggest Nike store in a 1,983-square-meter space.
With an increasing number of people visiting multiplexes or shopping malls, retail giants like Shinsegae and Lotte have been opening large-scale malls in the outskirts of Seoul.
Lotte opened a premium outlet in Goyang, Gyeonggi Province, in October last year, two months after Starfield Goyang was launched. Lotte opened its premium outlet in Paju in 2011, nine months after Shinsegae opened its store.
“We see it as an industry trend to open a mega mall or a premium outlet because there are consumer needs for convenient shopping and enhanced lifestyle,” said Lee Jung-hye, who designed the outlet, adding that Korea’s premium outlet market is valued at 20 trillion won (US$17 billion won).
Korea’s duty-free sales are likely to set a new annual record this year despite Chinese group tour traffic not having fully recovered. According to the Korea Duty Free Shops Association, duty-free store operators made $1.44 billion in October, a 28.6 percent increase year on year. This takes Korea’s total duty-free revenue between January and October to $14.3 billion, surpassing 2017’s full-year revenue of $12.8 billion.
“The local duty-free market was 14 trillion won [$12.4 billion] in size last year – some forecast this year will reach a new all-time record of 18 trillion won,” said a source at one of Korea’s largest duty-free store operators.
The growth is meaningful considering that Chinese group tours are not fully back in the market.
Industry watchers and analysts attribute the increase in duty-free sales this year to “daigongs,” or individual Chinese merchants that purchase Korean goods and resell them at home.
Before Chinese group tours were banned in March 2017 after Korea’s deployment of the U.S. Terminal High-Altitude Area Defense antimissile system, they were a major source of revenue for local duty-free stores. As traveling to Korea for Chinese became more difficult, the reselling business began to grow.
“Revenues are going up this year but we’re still waiting for group tours to come back,” said another source at one of top three duty-free companies.
Sales increases are generally good news, but industry watchers warn that operating profits will not grow as fast as revenues. Attracting daigongs entails high marketing costs. New duty-free outlets opened in Seoul this year, which means competition to pull in daigongs may become more intense.
Signs suggest restrictions on group tours from China are easing. Some online tour agencies have started marketing group tour packages to Korea on their websites. Last week, China’s largest online tour agency Ctrip posted Korean tour products on its website, but erased them the same day.
Shinsegae has secured investment worth 1 trillion won ($877.8 million) to build a separate company dedicated to its online business, finally giving wings to Vice Chairman Chung Yong-jin’s ambitious plan to create a “Korean version of Amazon.”
Shinsegae said Wednesday that it succeeded in attracting funds worth 1 trillion won from two global private equity firms, BlueRun Ventures and Affinity Equity Partners, to launch a separate company that will comprehensively handle the retail giant’s online business.
The investment plan was revealed in January, but the detailed conditions have been finalized after nine months of negotiation.
“Shinsegae Department Store and Emart have led growth within the group until now,” said Chung. “But from now on, the new entity dedicated to online business will lead growth. All capacity within the group will be concentrated on the online business.”
The retailer will spin off the online business from Shinsegae and Emart and merge them into a separate entity. Shinsegae is mainly in charge of its department store business while Emart is in charge of the eponymous discount chain and warehouse-style mart Traders, among others.
Of the 1 trillion won investment, 700 billion won will be used to establish the new company, which is scheduled to launch in the first quarter of 2019. The name of the new entity hasn’t been decided. The remaining 300 billion won investment will follow at a later date.
“Shinsegae’s new online business-dedicated entity is expected to help it grow into a core company in Korea’s e-commerce industry,” the company said in a statement.
Shinsegae has been running an integrated online platform called SSG.com, which encompasses several online malls such as Shinsegae Mall, Shinsegae Department Store, Emart Mall and Traders, all either run by Shinsegae or its discount chain affiliate Emart.
The soon-to-launch company will operate these online malls.
“A complete integration of the online platform will enable comprehensive investment, simplified decision making and enhanced proficiency,” the company said.
Shinsegae plans to concentrate investment in the online mall’s logistics service and infrastructure to begin with. It said it plans to invest 1.7 trillion won in logistics centers and related technology and achieve revenue of 10 trillion won for the online business by 2023.
Shinsegae currently runs two logistics centers dedicated to online malls in Bojeong and Gimpo in Gyeonggi. The retailer is building a third one in Gimpo, which is scheduled to start operating by the latter half of next year.
SSG.com launched as an integrated site in 2014 and has been recording an average 20 to 30 percent growth each year. It reached 2 trillion won in revenue last year and turned to profit making in the first half of this year
