Is Lotte Group considering eBay Korea acquisition?

Lotte Group Chairman Shin Dong-bin speaks during the meeting of company presidents at the headquarters in Seoul on Jan. 13. Courtesy of Lotte Group

By Kim Jae-heun

Lotte Shopping has recently turned over the management rights of Lotte ON, a combined online shopping platform for Lotte Shopping's eight retail affiliates, to Lotte Holdings.

The decision came after the retailing firm failed to attract customers or meet performance expectations. Despite the sharp increase in demand for contactless consumption due to the COVID-19 pandemic, Lotte ON saw only a 500 billion won increase in sales since its launch last April.

Lotte Group has de facto removed the head of the e-commerce business unit at Lotte Shopping Cho Young-je and may take over eBay Korea.

The group had reviewed acquiring eBay Korea several years ago but it decided not to. However, as Lotte ON is struggling to find its position in the fiercely competitive local e-commerce market, Lotte Group appears to be reversing that decision.

It joined the preliminary bid at the last minute to take over eBay Korea but did so independently without an underwriter. Not choosing an underwriter indicates the company isn't 100 percent confident about the deal.

Lotte Group looks to lack the conviction to successfully combine eBay Korea with its retail unit. EBay Korea is the No.1 player in the open market system but Lotte Group is not confident it will create synergy with Lotte ON.

Employees at Lotte Group do not have sufficient knowhow in the area of platform businesses either. It will not invest a large amount of money if the business keeps running at a loss. This is very different from Coupang's goal to dominate the market even if its accumulated deficit reaches 4 trillion won.

Lotte Group is not convinced of eBay Korea's current enterprise value too. Its price has jumped to 5 trillion won thanks to Coupang's listing on the New York Stock Exchange that raised the enterprise value of many local e-commerce firms.

Lotte Group has never bet in the trillion won range on a merger and acquisition deal.

Nonetheless, Lotte ON is running out of time to develop its performance, and so a turning point could be reached by acquiring eBay Korea so as to compete with Coupang and E-mart, which recently signed a business partnership with Naver.

“As many people know, Lotte Group is not desperate to acquire eBay Korea. The company is focusing on studying the value of eBay Korea and what synergy it would create if it merged with Lotte Shopping's competitors in the market,” a company official said.