Supermarket chain admits property buying but denies speculation
By Kim Tae-gyu
Homeplus, one of the country’s leading supermarket chains, is suspected of property speculation, a senior government official said Friday.
``The chain has employed the method of buying an entire building, where its super supermarket store would locate its business,’’ a senior official of the Knowledge Economy Ministry (MKE) told The Korea Times.
It means that Homeplus could buy the builder at a lower price only to see its value go up significantly, when one of its small stores moves in.
The official said that there were no plans to investigate Homeplus’ practice at the ministry level. It can be taken up by the Fair Trade Commission (FTC).
Homeplus is one of four supermarket chains in Korea, whose effort to open up SSMs or smaller versions of their supermarkets have been put on a temporary hold in the face of strong opposition by owners of mom-and-pop stores.
Homeplus currently operates a total of 244 SSMs, dubbed Homeplus Express, across the country to become the third-largest player in the market in terms of annual sales.
Yet, the entity owned by British firm Tesco has come under fire so often with regard to its advancement into the SSM market, even compared to the business bellwether of Lotte Mart.
``Lotte Mart tended to launch its SSMs where small-sized chains moved away. Hence, most people accepted the advent of Lotte Mart. By contrast, Homeplus took a different approach,’’ the MKE official said.
``The company took spaces formerly occupied by stationery stores or restaurants in so many cases. Subsequently, folks thought of it as an invader and this generated a bad image.’’
When contacted, Homeplus admitted that in some cases, they bought whole buildings where an SSM was planned but denied that it was an act of property speculation.
``We bought some buildings as their owners obliged us to do so in order to open supermarkets there. But in a vast majority of cases, we signed rental deals instead of purchasing the buildings,’’ a Homeplus spokesperson said.
``We are a retailer, not a real estate company. We have never chalked up big profits by buying the buildings where we open businesses and selling them. The claims are simply unacceptable.’’
Homeplus started its operation in Korea in 1999 as a joint venture between Samsung Group and Tesco, called Samsung Tesco. Afterwards, Samsung Group left the firm while leaving a trace of its CEO Lee Seung-han.
Lee initially worked for Samsung and was tapped as the first CEO of Samsung Tesco in 1999. Under Lee’s stewardship, Homeplus emerged as the runner-up retail chain in Korea with 123 super stores trailing only E-Mart and No. 3 player in SSM.
Presently, Tesco retains up to 95 percent stake in Homeplus while Samsung Construction and Trade, the affiliate of Samsung Group, holds some shares.
In comparison to other SSM operators, Tesco has been vulnerable to more frequent criticism.
For example, its strategy has been accused of attempting to sidestep the regulations _ it opened some stores where the company offered 49 percent of the total costs while the remaining 51 percent was assumed by investors.
Then, it is not susceptible to the relevant law that regulates the operation of the SSM. It stipulates that outlets with more than 51 percent investment from the brand owners will be governed by the rule.
Opening a new SSM typically costs about 1 billion won. Hence, Homeplus is estimated to spend around 500 million won to phase in a new store, which is not affected by the SSM regulations.
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