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Tag: south korea

  • JD.com partners with Korean shopping site Lotte.com

    JD.com partners with Korean shopping site Lotte.com

    China’s online direct sales company JD.com has partnered with South Korea’s online shopping site Lotte.com.

    Under the deal, JD.com customers will be able to purchase products from Lotte through JD Worldwide, the company’s cross-border platform.

    Products will cover categories including baby and maternity, cosmetics, fashion, everyday household products, home appliances, food and Lotte-branded products.

    “The demand for products through Korean Mall has been strong and partnering with Lotte will help us meet the growing needs of our users,” said JD Mall CEO Haoyu Shen.

    The announcement follows the successful launch in late March of Korean Mall, which sells authentic imported Korean products on JD Worldwide. Since its launch, dozens of Korean brands started to sell their products to Chinese consumers through Korean Mall. The best-selling product categories include personal care products and cosmetics.

    Lotte.com CEO Hyeong Jun Kim said JD.com’s users are the ideal audience for the company as they look to develop their business in China.

  • Chinese couples spend big in Korea

    Chinese couples spend big in Korea

    Korea is becoming a major destination for young Chinese couples looking to splurge on expensive items for their upcoming marriages.

    Chen Yi, 34, and Chai Xuefang, 30, who recently visited Seoul from Shandong province, China, are typical of the growing number of couples who are sparing no expense to make their big day special.

    The two bought two Vacheron Constantin wristwatches worth 100 million won ($84,350) each at the Hyundai Department Store in Apgujeong, southern Seoul. They also bought a two-carat diamond ring for 60 million won.

    “A lots of Koreans are preparing for their weddings at Cheongdam-dong [near Apgujeong in the posh Gangnam District],” said soon-to-be-wed Chai. “We plan to get wedding consulting [here in Seoul] exclusively for Chinese people.”

    Another Chinese couple, Yang Xiaoliang, 30, and his fiance Xu Jingjing, 27, last month bought a 10 million won Thom Browne suit for men and two Rolex wristwatches for the couple worth 150 million won each at the same Hyundai Department Store in Apgujeong. They purchased the items ahead of a wedding photo shoot at a studio in Cheongdam-dong.

    The Korean retail and hotel industry is taking notice of the growing number of Chinese couples who are spending big in Seoul to prepare for their weddings.

    They have become major customers who are spending large on high-end wedding gifts, including jewelry, wristwatches and designer suits and dresses. Majors stores are already catering to the growing demand.

    Hyundai Department Store’s Apgujeong branch plans to provide a wedding consulting program exclusively for Chinese couples, and have already enhanced other services for young Chinese customers. Since last month, they have provided a free delivery service where electronic appliances and furniture purchased by Chinese couples can be dropped off at their front door in China. The service has a limit of 30 kilograms (66 pounds) per person.

    Lotte Duty Free recently started a service where items purchased at its shops can be delivered from the Chinese airport to their homes.

    “We get a lot of inquires from Chinese tourists who come to Gangnam [District] to get wedding consulting,” said Lee Hyun-sook, a foreigner-exclusive concierge at Hyundai Department Store. “They shop after asking every detail, such as which brand Koreans most prefer for their own wedding gifts.”

    China Union Pay credit card purchases made by Chinese on imported brands such as Tiffany’s and Cartier soared 91.3 percent in the first eight months of this year compared to the same period last year at Hyundai Department Store. Purchases on furniture, electronic appliances and household goods saw a huge growth of 134.1
    percent.

    Shinsegae Group is widening its marketing strategy to attract soon-to-wed Chinese couples in its department stores and other major affiliates, including its discount store E-Mart and its hotel business Westin Chosun.

    Shinsegae Group invited two couples from Shenyang and Tianjin to Seoul, where they will get a wedding photo taken at the Cheongnam-dong studio that took wedding pictures for famous Korean actresses Jun Ji-hyun. They will also get the chance to experience a traditional Korean wedding ceremony at the Westin Chosun Hotel and shopping at E-Mart and the retail group’s other outlets. The cost is 15 million won per person.

    “We plan to secure the lead in grabbing Chinese couples visiting Korea to get wedding services during the most popular wedding seasons for the Chinese, which starts this month and leads up to the end of the year,” said Shinsegae CEO Jang Jae-young.

    Wedding gifts, including high-end wristwatches, jewelry and designer bags, accounted for 60 percent of all sales made by Chinese tourists at Shinsegae Department Store during China’s May Day, from April 25 to May 3.

    Hotels are also recognizing the growing trend.

    Plaza Hotel last month introduced a wedding package where a hopeful groom can make a proposal at the hotel’s restaurant.

    The package includes a studio wedding photo shoot that comes with makeup from a company that many Korean female celebrities like Han Ye-seul and Han Hyo-joo frequently use. The price tag on the three-day package is 7 million won including flight tickets.

    Lotte Hotel is offering a package targeted at Chinese customers that includes not only the wedding photo and makeup but also a proposal ceremony and spa. The cost for the three-day program is 11.8 million won.

     

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  • Tesco Nears $6B Deal To Sell South Korea Unit

    Tesco Nears $6B Deal To Sell South Korea Unit

    A group led by MBK Partners Ltd., North Asia’s biggest independent buyout firm, is trying to close a deal to buy Tesco Plc’s business in South Korea for about $6 billion, including debt. The acquisition, if completed, would be the country’s biggest private equity deal, Bloomberg reported, citing people familiar with the matter.

    The group, which includes South Korea’s National Pension Service, got exclusive negotiating rights Wednesday to take over Tesco’s Homeplus business. If the deal goes through, it would give the MBK-led group a retail chain that stands second only to market leader E-Mart of the family-run Shinsegae Group Co., through more than 900 stores and over $7 billion in annual revenue.

    The deal would also allow U.K.’s Tesco to pay off its massive debt of 21.7 billion pounds ($33.2 billion). The Bloomberg report added that Tesco is also looking at options to sell its analytics business, Dunnhumby.

    MBK’s consortium reportedly beat a rival consortium led by New York private equity firm KKR & Co. The South Korean business is considered Tesco’s “crown jewel” in Asia, Bloomberg reported, citing estimates from Credit Suisse (SIX:) Group AG.

    The business has a valuation of 4 billion pounds, more than the 1.6 billion-pound valuation of Dunnhumby, a U.K customer science company owned by Tesco. However, Homeplus posted a net loss of 300.1 billion won ($255 million) for the year ending February 28, down from last year’s profits of 463 billion won. Revenues for the company also reportedly shrank to 8.6 trillion won, down 4 percent, due to weak household spending. Homeplus reportedly had a market share of 25 percent, behind E-Mart’s 29 percent.

    Tesco posted a loss of 6.4 billion pounds ($9.56 billion) in April, the biggest-ever in its 96-year history. The Bloomberg report added that the company’s chief executive Dave Lewis is trying to revive sales for the company’s market-leading grocery business, which is facing a severe price war due to the expansion of German discount retailers Aldi and Lidl.

    The retailer entered South Korea in 1999 through a joint venture with Samsung (KS:) Group in which Tesco held an 81 percent stake initially, Bloomberg reported. It came in with an investment of 130 million pounds and slowly bought out Samsung’s stake.

    Tesco’s shares have fallen close to 20 percent in the past one year while London’s benchmark has seen a decline of nearly 11 percent in the same period. On Wednesday, the stock was up 0.11 percent in mid-morning trade.

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  • South Korea retail sales easing upwards

    South Korea retail sales easing upwards

    South Korean retailers are breathing a sigh of relief as consumers return to stores in the wake of the MERS scare receding.

    South Korea retail sales rose 0.5 per cent in July to 30.14 trillion won (US$25.6 billion) after receding 0.6 per cent in June.

    Statistics Korea said sales rose month on month as well as year on year.

    “The fallout of the MERS outbreak that caused demand to slump seems to have receded in July, leading to a slight rise in consumer spending,” a spokesman for Statistics Korea said.

    “While things have not returned to normal, sales are rising in areas that were most affected by the outbreak.”

    The MERS outbreak hit in late May. Thirty-six people subsequently died and a further 186 were infected before the outbreak was brought under control and confirmed over by health officials in July.

    The value of online transactions rose by 21.2 per cent, driven by sales of food and cosmetics as cautious shoppers opted to have products delivered rather than visit stores and risk exposure.

    Online shopping accounted for 15.8 per cent total retail sales in July.

    In stores, food and beverage sales rose 3.8 per cent year on year in July and electronics sales by 3.2 per cent. Department store sales rose 0.4 per cent, having fallen 12 per cent in June.

    Sales at convenience stores rose 33.6 per cent and at supermarkets by three per cent.

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  • Estee Lauder travel-retail revenue falls

    Estee Lauder travel-retail revenue falls

    Cosmetics-giant Estée Lauder Companies reported a decline in travel-retail sales in fiscal year 2015 (ended June 30, 2015), despite an increase in global airline traffic and expanded distribution in the channel.

    The company said that a stronger dollar and the outbreak of Middle East Respiratory Syndrome (MERS), which killed nearly 40 people in South Korea this year, contributed to decline, with travel-retail sales falling by 4% in the last quarter of fiscal year 2015.

    Over 55,000 tourists had cancelled trips to South Korea by the mid-June, according to the World Economic Forum.

    Slower retail growth in Hong Kong and China, as well as a decline in spending by Russian and Brazilian travellers are also expected to impact sales revenue into the 2016 fiscal year.

    The news came as the company also forecasted below-estimated earnings across the whole business for the coming fiscal year, and announced that net sales in the fiscal year ending in June went down to $10.78bn, a 1.7% decrease from $10.97bn the previous year. The company said it missed its 7% growth target because of accelerated sales orders in Latin America and the use of constant currencies to calculate international profits.

    For the three months ended June 30, 2015, the company reported net sales of $2.52bn, compared with $2.73bn the previous year. Skincare products were chiefly affected, with overall sales falling by 16% in Q4.

    However, expanded distribution, including in travel-retail, also helped lift some labels’ revenues. While sales for heritage-brands Estée Lauder and Clinique slumped, the conglomerate’s current global-marketing focus has been on growth for youthful or luxury brands like Smashbox and Tom Ford. Along with Aveda hair-care product, these brands’ expanding travel-retail channels were reported by Estée Lauder Co. to have resulted in year-on-year revenue growth that has helped offset some of this year’s losses.

    The company has said that by adjusting to factors like constant currencies and accelerated orders in the fiscal year 2014, strong underlying growth in the company becomes apparent.

    President and CEO Fabrizio Freda said in the company’s report for the fiscal year 2015 (Q4 and full year): “Together with our powerful brand portfolio and financial discipline we finished our fiscal year with a strong Q4, generating 7% constant currency sales growth, after adjusting for the accelerated sales orders we reported in fiscal 2014.

    He added “For the full year, our adjusted 6% local currency sales growth met our expectations, and we exceeded our earnings per share forecast …Our sales grew at a faster rate than global prestige beauty, due to the success of our multiple engines of growth. Standout performances generated double-digit sales gains in most of our makeup and luxury brands and the online, specialty-multi and freestanding store channels.

    “In fiscal 2016, we expect constant currency net sales growth of 6% to 8% and double-digit earnings per share growth, after adjusting for the accelerated sales orders.”

    Reuters reported on Monday that Estée Lauder Cos Inc shares fell by up to 5.3% to $82.8 per share yesterday, but the value rose to $84.48 today (still down from $90 reported at the beginning of this month). Estée Lauder is currently expanding its travel-retail offering, focusing on colourful, clean brands like Mac and Smashbox, as well as its successful London brand Jo Malone.

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  • M&G makes first retail acquisition in South Korea

    M&G makes first retail acquisition in South Korea

    M&G Real Estate has acquired three retail assets in South Korea at a combined value of US$230 million, representing an average yield of 6.5%. The acquisition was made on behalf of its core Asia real estate strategy, managed by Singapore-based Erle Spratt.

    Under the terms of the deal, M&G Real Estate has acquired two hypermarkets: the first in Daejeon, South Korea’s fifth largest city; the second in Jeju, the capital of the Jeju Province and the nation’s premier tourist destination. The third asset is an outlet mall in Incheon City, the country’s third largest city after Seoul and Busan. All three assets are highly sought after retail outlets in prime locations and are leased to South Korea’s largest retailer, Lotte Shopping.

    Hyesik Ryu, Managing Director, M&G Real Estate Korea, comments: “We were one of the first non-domestic institutional investors to invest in South Korea when we bought into the country’s commercial office sector in 2004. M&G Real Estate has developed a deep understanding of the market, enabling us to make this latest investment in the retail sector, which will strengthen the strategy’s long term income stream.”

    Erle Spratt adds: “We’re seeing strong capital flows, particularly from global pension funds and insurance companies in the UK and Europe. With responsibility for more than US$2 billion in assets, we are well positioned to pursue property investments across the region to further improve our risk adjusted returns and sustain the outperformance of our portfolio.”

    Stefan Cornelissen, M&G’s head of institutional business, Benelux, Nordics and Switzerland, says: “The Asia Pacific real estate market is now the second largest in the world and rivals the US and Europe in terms of its maturity, transparency and liquidity. European investors in search of diversification can now benefit from Asia’s strong economic growth and attractive long term returns without going higher up the risk curve.

    “We have recently had a significant commitment from Dutch investor, Blue Sky Group, which has invested on behalf of its recently launched Core Asia Pacific Fund. We expect further capital to follow from other UK and European investors. Asian real estate has come of age and is earning itself a strategic place in a diversified core real estate portfolio.”

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  • Cellphone makers switch to budget handsets after law change

    Cellphone makers switch to budget handsets after law change

    South Korea’s mobile phone makers are breaking away from their premium-oriented smartphone lineups to churn out cheaper phones as consumers are more price-conscious due to tougher subsidy rules, industry watchers said Wednesday.

    Samsung Electronics Co. recently rolled out its latest mid-end phone, the Galaxy A8, at an about 20 percent discounted price compared with the flagship Galaxy S6, and the budget phone Galaxy J5 for less than 300,000 won (US$259).

    It also started selling the Galaxy Folder, with a price tag similar to the J5 model, which is designed to woo older generations, who need fewer features.

    Samsung’s move came after the Galaxy Grand Max, a low-end model that was released in January, became a smash hit in Korea, with 700,000 units sold so far, watchers said.

    LG Electronics Inc., Samsung’s smaller rival, has also been bolstering its budget phone lineup, unveiling five new models this year, including the LG Volt, the G style and the LG Bello II.

    Industry watchers said such a shift in their lineup strategy is attributable to the enactment of a new law in October last year, which caps the phone subsidies that mobile carriers can provide to retail stores at 330,000 won.

    Although the law was revised to restrict excessive incentives that had led to cutthroat competition, it has prompted consumers to look for cheaper phones because of the reduced subsidies.

    As part of a bid to diversify portfolios, SK Telecom Co., the top mobile carrier in the country, is apparently mulling launching a cellphone rental service in a joint project with its information technology service unit.

    If the rental business kicks off in Korea in fall as widely forecast, it will bring a significant change in the market landscape as it will be an unprecedented move and affect other rivals, market watchers said.

    Skeptics, however, played down its growth potential because the device has more personal elements like banking details and photos compared with other common rental products.

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  • S. Korea opens mini-sized derivatives market

    S. Korea opens mini-sized derivatives market

    South Korea opened a mini-sized futures and options market on Monday to offer investors wider choices for hedging and trading, hoping to revitalize the once-vibrant derivatives market with robust liquidity.

    The Korea Exchange currently operates futures and options trading based on the KOSPI 200 index, a flagship index composed of the top 200 stocks by market capitalization. The new system offers contracts for as little as 25 million won ($21,900) and 5 million won for KOSPI 200 futures and KOSPI 200 options, respectively, one-fifth of the minimum price for the current contracts. On the first day of trading, 3,132 contracts of mini KOSPI 200 futures were traded. Retail investors and institutions each held 43.2 percent and 38.9 percent, while foreigners held 17.9 percent, the KRX said.

    Mini KOSPI 200 options registered 6,814 contracts, with half of them traded by foreigners. Institutions and retail investors accounted for 26.8 percent and 22.7 percent of the turnover, respectively. The bourse operator expected the low-cost entry will attract more investors to the derivatives market to boost liquidity and improve the pricing mechanism.

    The latest measure comes as the nation’s derivatives market has suffered a sharp downfall in its trading volume since stricter regulations were adopted in 2011 to limit small speculators in response to calls to cool the highly speculative market.  South Korea was the world’s leading derivatives market in 2011, but it fell to 12th place last year as tight access rules have driven investors to other markets, including the United States and Japan, according to the KRX.

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  • Lotte China closes stores

    Lotte China closes stores

    South Korea’s Lotte is finding the Chinese retail market tough to crack.

    Lotte Mart, the supermarket arm of South Korea’s Lotte Group, is to close four underperforming supermarkets in East China’s Shandong Province, according to the China Business Journal newspaper.

    Lotte is said to be losing market share in Mainland China unable to differentiate itself in the middle ground between local retail chains and the growing power of online retailers such as Alibaba and JD.com.

    Two of the stores to close are located in Qingdao, a second tier city located on the coast. A third is located in Weihai and the fourth in Weifang, an industrial city in central Shandong.

    Another source observed Lotte Mart did not provide a compelling food offer with its supermarkets.

    “For young people, Lotte Mart is not a good choice if they want to eat out as well as shop. There are not many fancy restaurants in Lotte Mart compared with other markets,” the customer told The Global Times on Sunday.

    Lotte Mart has 120 stores in China, 116 in Korea, 39 in Indonesia and 10 in Vietnam.

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  • Understanding is key to cracking Asia

    Understanding is key to cracking Asia

    It’s important for investors to be aware of the subtle differences between key Asian countries, according to a survey by BNY Mellon and analytics and advisory firm Oxford Metrica.

    The study looked at trends across Singapore, Taiwan, Hong Kong and South Korea, and noted that the differences between the markets also applies to distribution channels, and other factors that have an impact on the market.

    For example, Hong Kong retailers showed a preference for low-cost fund complexes that could meet all of their needs, while Taiwanese retailers appeared to be more inclined towards appointing specialist managers for each category.

    The report also highlighted the comparatively high costs faced by retail investors in South Korea, compared to institutional investors, and noted that in Singapore and Taiwan, more importance is placed on investment performance, while in Hong Kong, the security of a well-known brand takes prevalence.

    There were also differences in price sensitivity. While retail investors in Singapore, Hong Kong and South Korea that invest cross-border are sensitive to pricing by investment firms, this is not such a concern in Taiwan.

    South Korean institutional investors enjoy the lowest fund prices and, at the same time, regulatory developments in South Korea are geared towards attracting more international assets.

    Product range preferences also vary – a one-stop shopping solution is popular among retail investors in Hong Kong, and they tend to favour firms that can provide funds suitable throughout different market cycles. Hong Kong institutions, however, generally favour niche providers that can provide specialist expertise.

    Retail investors in Taiwan and South Korea were more inclined towards funds offered by specialist providers, and the retail market in Taiwan has even greater product diversity than Hong Kong.

    For retail and institutional investors in Singapore and Taiwan, and, to some extent, South Korea, the report suggested that a fund’s relative performance to the index as important. In Hong Kong, however, brand security tends to hold more weight.

    In Hong Kong, brand security appeared to hold greater weight than outperforming the benchmark in the long-term, however cumulative returns over one-year, three-year and five-year periods were shown to be a strong driver of sales for retail investors across all four markets.

    Singapore, Hong Kong, Taiwan and South Korea are all markets where the European UCITS structure is widely accepted, and so represent accessible entry-points for non-Asian investment managers looking to sell funds.

    Daron Pearce, global investment manager segment head for investment services at BNY Mellon, said: “Sales success in Asia’s major cross-border funds markets requires a deep understanding of the different factors that inform retail and institutional demand.”

    He added: “As one might expect, retail investors are generally more price sensitive than institutional investors. However the interplay between price, product range and performance is finely balanced across all markets analysed and, as such, close attention to the realities of individual markets is required by fund promoters.”

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  • S.Korea picks Hotel Shilla JV, Hanwha to operate new Seoul duty-free stores

    S.Korea picks Hotel Shilla JV, Hanwha to operate new Seoul duty-free stores

    South Korean retail giants HDC Shilla Duty Free and Hanwha Galleria Timeworld on Friday clinched a high-profile bid to operate duty-free stores in downtown Seoul in what is seen as a golden ticket to bolstering their footing in a retail industry struggling from anemic consumer spending.

    Seven companies had vied for the license, the first of its kind open to large corporations in 15 years. Lotte Duty Free, HDC Shilla Duty Free, a joint venture between Hotel Shilla and Hyundai Development Co., and SK Networks were aiming to increase their market share, while E-land, Hanwha Galleria Timeworld, Hyundai DF and Shinsegae DF were trying to make a fresh entrance into the duty-free sector.

    Currently, four companies run seven duty-free stores in Seoul, whose main customers are foreign tourists, especially those from China. Their insatiable appetite for shopping has been a rare bright spot in the local retail sector grappling with sagging sales amid a weak economy.

    Buoyed by their spending, the duty-free market has been posting double-digit growth in the past five years, compared with crawling sales growth at department stores and hypermarkets.

    In 2014, duty-free stores in Seoul posted a combined sales of 4.4 trillion won (US$3.9 billion), which accounts for more than half of the country’s 8.3 trillion won duty-free market.

    Meanwhile, the customs agency also announced two smaller retailers who will be operating duty-free stores in Seoul and Jeju, South Korea’s southernmost resort island, respectively.

    The new licenses will be valid for five years under a revised customs regulation that shortened the contract period from 10 years. The winning bidders are required to open their stores within six months.

     

     

     

  • Brutal retail market awaits buyer of Tesco South Korea business

    Brutal retail market awaits buyer of Tesco South Korea business

    Any buyer of Tesco’s $6 billion South Korea unit will need a strategy to boost returns in a lethargic and saturated market for traditional retailers, likely involving real estate sales and a greater focus on Internet shopping.

    Britain’s Tesco has hired HSBC to advise on a potential sale of its South Korean unit, Homeplus, Reuters reported this month, in what could be Asia-Pacific’s largest private equity deal and the No. 2 merger in the Asian consumer sector.

    Given the scarcity of big buyout targets in Asia, the sale is generating strong interest among buyout firms including KKR & Co and Carlyle Group CG.N, sources with knowledge of the sale process said. That’s despite difficulties posed by South Korea’s crowded retail sector, a sluggish and fast-aging economy, plus regulatory and labor challenges.

    “Anyone going with the view of closing unprofitable shops, cutting work force, will be in for a surprise,” a senior Hong Kong-based investment banker familiar with the process said, citing likely opposition from labor unions.

    “It’s a tough market but there are some low-hanging fruits in terms of stripping property assets,” said the banker, who declined to be identified as the discussions are confidential.

    Homeplus Co Ltd’s property holdings, consisting mainly of stores, had a book value of 3.09 trillion won ($2.77 billion) as of the end of February, according to a regulatory filing.

    With about 400 stores including 140 hypermarkets, 88 of which it owns, Homeplus has raised about 1.2 trillion won since 2012 by selling and leasing back eight of its biggest-selling stores, according to South Korean deal website Invest Chosun.

    Its prime real estate holdings include a hypermarket in densely populated Seoul suburb Euijeongbu, which frequently ranks among its top 5 stores by sales.

    But it’s a crowded field. South Korea has nearly 500 hypermarkets for a population of 50 million, or twice what the industry considers optimal. The difficulties prompted Carrefour and Wal-Mart to quit the country in 2006.

    In a nod to a fiercely competitive market, Homeplus earlier this year sacrificed an equivalent of about 100 billion won in annual profit, or almost half of last year’s earnings, by cutting prices on some 500 kinds of fresh produce.

    “Competing by undercutting price has become the norm and is expected to continue in future,” said Lee Kyoung-hee, principal researcher at Shinsegae Research Institute.

    ONLINE GROWTH

    As the population ages faster than in any other developed economy and households shrink, retail sales in South Korea grew just 1.4 percent in each of the past two years, lagging broader economic growth.

    E-commerce, however, jumped 17 percent last year to 45.2 trillion won, or 14 percent of total retail sales, and hypermarkets have been scrambling to build share in a fragmented online segment where most players lose money.

    Homeplus’ share of South Korea’s online retail market has risen steadily but was still just 645 billion won last year, according to Euromonitor data in a CLSA report, for market share of just 2 percent, in line with larger rival E-Mart.

    “Hypermarket chains like Homeplus have been bolstering online sales as a possible growth solution, among admittedly few options,” said Kim Tae-hong, analyst at Yuanta Securities Korea.

    Lower priced warehouses have been another bright spot for Korean retailers, but while both E-Mart and Lotte Shopping’s (023530.KS) third-placed Lotte Mart have warehouse brands, Homeplus does not.

    Meanwhile total revenues for existing hypermarket stores have declined since 2012 when new rules required them to close for two Sundays a month to protect traditional markets. Homeplus saw a drop in same-store sales for two straight years.

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  • Tesco’s South Korea empire draws interest from private equity giants

    Tesco’s South Korea empire draws interest from private equity giants

    KKR and Carlyle, the US private equity firms, have been invited to bid for the Asian business, which trades as Homeplus, while London-based CVC Capital Partners has also been asked to bid.

    The decision to sell the South Korean stores comes as the retail giant’s chief executive Dave Lewis looks to streamline the business, to concentrate on its core UK shops and raise cash.

    After two decades of uninterrupted growth, Tesco has been struggling after it became distracted by overseas expansion and failed to spot the threat of discounters like Aldi and Lidl.

    The retailer is now looking to slash capital spending, as well as fund a vicious supermarket price war and put more people on the shop floor.

    Hong Kong-based Affinity Equity Partners and Asia-focused MBK Partners were also invited to bid, and Hyundai Department Store, which is separate from the car maker, said today that it was considering bidding.

    Tesco, advised by HSBC, has asked for indicative bids later this month.

    If the sale is achieved it would be Asia’s biggest private equity deal and the region’s second biggest consumer deal ever. Sovereign wealth funds could be involved in the financing of it, given the size of the sale.

    Homeplus is Tesco’s largest business outside Britain, with more than 400 stores, 500 franchise stores and over six million customers a week.

    But the business has been under some pressure, with falling like-for-like sales for the last two years.

    Tesco is also selling its £1 billion Dunnhumby data business, and has already sold its Blinkbox digital entertainment service and Tesco Broadband to TalkTalk for an undisclosed sum.

  • Retail Sales Hit Hard by MERS

    Retail Sales Hit Hard by MERS

    The ripple effect of the Middle East respiratory syndrome (MERS) is spreading throughout Korea’s retail industry, including department stores, discount stores, restaurants, and cosmetic shops.

    Amid rising concerns about possible infection by the MERS virus, an increasing number of consumers are avoiding crowded places, dealing a blow against the sales of offline stores, including department stores.

    As the MERS crisis prolongs, the number of foreign tourists, including Chinese ones, declines, giving a negative impact on the cosmetics industry. According to industry sources on June 5, Lotte Department Store suffered an 8.4-percent decline in sales during the period from June 1 to 4, compared to a year ago.

    Shinsegae Department Store also suffered a 3.7-percent decline in sales during the same period. E-Mart, the largest discount store in Korea, recorded a 7.8-percent plunge in sales during the period. In particular, its outlet in Dongtan and Pyeongtaek, in southern Gyeonggi Province where the highest number of MERS cases were reported, suffered a 19.7-percent and a 16.2-percent plunge in sales during the period.

  • Chinese, South Koreans prefer online shopping to stores

    Chinese, South Koreans prefer online shopping to stores

    Online shopping has overtaken bricks and mortar retail as the most popular method of purchase in several Asian markets.

    That stunning revelation comes from a new report from real estate company CBRE How We Like to Shop Online which is based on responses from online consumer panels. CBRE warns the findings represent the emerging behavior of this important and fast-growing segment of all markets, but may not fully represent consumer behavior in markets with low online penetration.

    That said, the conclusions remain relevant to traditional retailers.

    “While 50 per cent of Asia Pacific consumers still physically visit a shop to make a purchase, findings show that in emerging markets such as China and India, the majority of respondents – 76 per cent and 68 per cent respectively – use online shopping as their most commonly used method of making purchases,” said CBRE in an overview of the report.

    “This is also the case in more developed markets of South Korea and Taiwan where 73 per cent and 55 per cent of consumers respectively, also said their primary method of making purchases is online.”

    “For emerging markets, given the lack of quality retail space – particularly in lower tier cities – advances in technology and logistics networks mean that online retail is often the most efficient way for retailers to reach their customers,” said Jonathan Hsu, head of occupier markets research, CBRE Asia Pacific.

    Along with convenience, pricing ranks as one of the top reasons why consumers shop online – 63 per cent of the total number of respondents surveyed identified this as their key deciding factor. These correspond to the same deciding factors when shopping at physical stores.

    “With 56 per cent of Asia Pacific consumers using their desktop or laptop to check prices of products online, price transparency is an important aspect for retailers to consider,” said Joel Stephen, senior director, head of retailer representation, CBRE Asia.

    “We recommend retailers review their regional pricing strategy, particularly in China and South Korea where more than two-thirds of consumers identified lower prices and better offers as the main reason behind their decision to shop online. In Asia Pacific, foreign brands – in particular luxury – are often more expensive than other regions due to import duties, exchange rates and the franchise model impacting the price. This may encourage consumers to consider alternative sales channels, such as overseas online markets, in search of better deals,” said Stephen.

    The ability to compare products without having to physically visit individual stores is another key factor for the region’s consumers when shopping online. This trend is more prominent in emerging markets such as Vietnam (64 per cent), China (61 per cent) and India (58 per cent) where quality shopping centers or shops are often located far from each other.