Shinsegae, Lotte use low-priced wine to lure shoppers back to stores
A customer looks at wines sold at E-mart in Seoul in this 2018 file photo. Courtesy of E-mart
By Kim Jae-heun
The country's top two discount store chains, E-mart and Lotte Mart, are expanding sales campaigns for low-priced wines aiming to get people to buy goods in offline stores as online shopping surges in popularity during the pandemic.
Under Korea's commerce law, wine can only be sold offline. That means the more customers visit discount stores to buy wine, the higher the chances that they will purchase other daily goods at the same time.
“The two companies chose wine as 'bait' to bring back customers, as alcoholic beverages cannot be sold online,” an industry source explained.
The source said the fact that both brands offer quality wines at reasonable prices is helping them retain their statuses as major market players, despite the rise of e-commerce firms.
E-mart and Lotte Mart have established themselves as local channels for purchasing imported wines.
Chung Yong-jin, the vice chairman of Shinsegae, which operates E-mart, came up with an ultra-low pricing strategy with the company's buying power. He also opened a wine importer in 2008, saying that the prices of wines coming into Korea were too high.
Chung recently purchased 1 million bottles of Chilean wine at once to reduce the unit cost.
The figure is over 300 times the volume of wine an ordinary local importer purchases and it has helped E-mart to sell the product cheaper than what it costs in Chile.
E-mart has built up its experience importing wine since 2019, when it introduced a Portuguese wine brand called Dos Copas. It was the year when E-mart suffered its first ever operating loss of 29.9 billion won in the second quarter, due to the performance of fast-growing e-commerce firms like Coupang.
“We saw that we would lose competency in the local wine market if we could not offer cheaper prices than everybody else. We have searched for undiscovered wines that cost less than $10 in the country and introduced them here,” a Shinsegae official said. “Previously we had imported only 3,000 to 4,000 bottles of wine and sold them within six months. However, we imported 1 million bottles of the Dos Copas series and sold all of them in four months. This method changed the whole wine-importing system.”
Lotte Mart joined the imported wine market under the leadership of Lotte Group Chairman Shin Dong-bin. The retailer recently signed a contract for 400,000 bottles of Real Fuente from Spanish winery Vinos y Bodegas. Two types of wines are sold at prices 1,000 won lower than E-mart's Dos Copas series wines.
Shin also introduced the premium Chilean wine Trevento after he announced in November 2020 that Lotte Group will make its wine business a key growth engine.
Lotte Mart's strategy is to study the market first and then decide which alcoholic beverages to import. After that, all of the affiliates of Lotte Shopping, Lotte Group's shopping unit, work together to purchase as much wine as possible at once to import them at the cheapest prices.
“We have established some knowhow for importing well-known wines, like Moet Imperial, for our customers to purchase them at the prices offered in the wines' countries of origin,” a Lotte Mart official said.