Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
SK, Lotte, Shinsegae struggle to cut costs for e-commerce units
The logo of 11Street / Courtesy of 11Street
By Park Jae-hyuk
11Street, Lotte On, SSG.com grapple with worsening profits
SK, Lotte and Shinsegae have implemented various measures to reduce costs for their money-losing e-commerce units, as they have lagged behind Coupang and AliExpress in terms of the number of users, according to industry officials, Thursday.
SK Square’s 11Street, which is currently up for sale, will relocate its head office to U Planet Tower in Gwangmyeong, Gyeonggi Province, from the Seoul Square building near Seoul Station by September, as part of its efforts to cut rental costs.
“We decided to relocate our head office as our lease agreement will expire,” an 11Street official said. “After the relocation, we will do our best for the convenience of our employees.”
The e-commerce firm carried out voluntary redundancy programs in March this year and December last year. Around 50 employees of the company were also transferred to logistics centers earlier this year, in order to reduce spending for outsourcing.
Although its union has protested the restructuring and called for more investments, its management has maintained a firm stance on efforts to improve financial soundness, as the company has failed to turn a profit over the past four years.
A consumer uses Lotte On's mobile app in this undated file photo. Courtesy of Lotte Shopping
Lotte On, an e-commerce business of Lotte Shopping, has been carrying out its first voluntary redundancy program since its launch in 2020. The decision was made under the leadership of CEO Park Ick-jin, a private equity industry expert who previously worked for Affinity Equity Partners and several foreign and domestic financial services firms.
“We decided to carry out a voluntary redundancy program to be reborn as a competitive organization through the reshuffle amid the rapidly changing e-commerce market conditions,” a Lotte On official said.
The e-commerce business department has never been profitable in the four years since it was created through the integration of the online shopping malls of Lotte’s retail affiliates.
Before the voluntary redundancy, Lotte On asked low performers to leave the company and decided to relocate its office from Lotte World Tower near Seoul’s Jamsil Station to less expensive shared offices near Samseong and Yeoksam stations. It also stopped its quick grocery delivery service in April and its night delivery service in 2022.
Shinsegae’s SSG.com and Gmarket tasked CJ Logistics with the delivery of all of their products to reduce logistics costs. SSG.com is even considering selling its logistics centers to CJ.
Since its launch in 2019, SSG.com has never made any profits. Gmarket has also failed to make profits since Shinsegae acquired the e-commerce firm from eBay.
According to data from market tracker Wiseapp Retail Goods, Coupang was the e-commerce platform used most frequently by Koreans in May, followed by AliExpress, 11Street and Temu.