By Park Si-soo
The domestic retail industry is facing an uphill battle as Hyundai Department Store is to enter the country’s lucrative premium outlet mall industry, currently occupied by retail giants Shinsegae and Lotte.
The second largest department store chain of Korea said its first U.S.-style luxury outlet mall will open in Gimpo by the first half of 2014 with another one in Songdo International City. A target date for the Songdo mall’s opening has yet to be decided.
Korea’s premium outlet mall industry has grown nearly 20 percent each year, according to analysts. Shinsegae’s outlet mall in Yeoju, Gyeonggi Province, had 2.5 million visitors in 2008, but the figure has shown a steep rise to reach five million last year.
A Hyundai spokesman said the move is to diversify the retail giant’s business portfolio, of course after taking into account the market’s bullish trend, denying allegations that its belated entry is a result of declining sales of its department store chains from early this year.
“We have conducted various studies and research for years on the marketability of the two envisioned malls,” the spokesman said. “It took some time for us to find ideal venues.”
Hyundai’s two rivals tapped into the industry five years ago. Sensing great potential for the luxury goods market, Shinsegae, in partnership with U.S.-based Simon Property Group, opened the country’s first American-style high fashion outlet in Yeoju in June 2007. The mall, named Shinsegae Chelsea, features 140 designers and famous brand outlet stores.
It opened a second premium outlet mall in Paju, northern Gyeonggi Province, in March last year and is now working to open a third in Busan by September 2013.
Lotte, the country’s No. 1 department store chain, joined the market one year later than Shinsegae. It opened its first luxury outlet in Gimhae, South Gyeongsang Province, featuring some 230 outlet stores. It opened the second in Paju in December last year, featuring 213 stores and is now pushing to open two others, one in Buyeo, South Chungcheong Province, in the first half of 2013 and the other in Icheon, Gyeonggi Province, in the second half of next year.
Hyundai underscores easy accessibility as a key competitive edge of its first project.
“The Gimpo outlet will locate just 17 kilometers away from downtown Seoul, which takes roughly thirty minutes by car,” a Hyundai official said. “Our rival outlet malls near Seoul take more than one hour (by car). It was one of the key motivations behind our entering into the highly competitive premium outlet mall sector.”
It is unclear how many luxury brands the outlet will have, but the spokesman said the company is working hard to lure as many as possible, ensuring that the number will match its rivals.
He cited several tourist attractions in the making in the vicinity of the Gimpo mall as another competitive edge. It is close to a man-made waterway for small and medium-sized vessels, offering rare beautiful scenery in the metropolitan area.
“A giant amusement park and many other entertainment and leisure facilities will be located near the mall, meaning family visitors will be able to enjoy shopping and other recreational activities in one trip.” The official said his firm is looking for other venues suitable for additional malls.
Facing Hyundai’s challenge, Shinsegae and Lotte is accelerating efforts to dominate the market.
In November, Shinsegae Chelsea announced a plan to expand its Yeoju mall by 2014. It plans to invest some $67 million in almost doubling its size from 264,400 to 462,700 square meters. With the expansion, the number of brands is to increase from the current 140 to 250.
The expansion is forecast to create about 2,000 jobs and draw approximately 6 million domestic and foreign visitors annually, according to the company. Lotte is also planning of doubling the size of its in Gimhae shopping center by the end of this year.