Cash-strapped Lotte to undergo large-scale restructuring
Lotte plans to transfer all online business staff to Lotte ON team
By Kim Jae-heun
The country's largest retailer Lotte is going through the toughest time in its history, affected by the pandemic and its sluggish transition to an online sales market.
A large-scale reshuffle is “very near” for Lotte Group's retail unit ―including reallocation of high-ranking executives at Lotte Shopping. But Lotte has denied the possibility.
“There has to be due progress for personnel changes, but nothing is in motion regarding such a plan,” a Lotte Holdings official said, Monday.
Despite the denial, Lotte Shopping is predicted to transfer a majority of staff in charge of online business at department stores and supermarkets to Lotte ON, due to the tepid results from its online shopping business.
“This means unifying the retailer's personnel in online business under one control tower to seek quicker decision making,” an industry executive said.
Lotte has taken several progressive steps in the past, such as appointing Kang Hee-tae as CEO of Lotte Shopping in 2019 and scouting Na Young-ho, a former head of eBay Korea's strategic planning division, to lead its newly launched online mall Lotte ON in April. However, they have not yet shown any significant results.
In the second quarter of this year, Lotte ON's sales fell by 10.4 percent to show 29 billion won ($25.3 million) year-on-year. Lotte ON's operating loss also increased to reach 32 billion won ($27.92 million) in the same period.
Lotte Shopping itself improved its operating profit by 444.7 percent to mark 7.6 billion won between April and June. But that is only 10 percent of the predicted figure reached by local security firms, as the government alleviated its quarantine measures when the pandemic seemed to come under control earlier in the year.
They expected Lotte Shopping's operating profit to skyrocket by 4,728.5 percent in the second quarter. Lotte Home Shopping and Hi-Mart, Lotte's retailer of electronic goods, showed poor business performance. Shinsegae's unstoppable expansion of its online business is also placing pressure on Lotte Group.
Shinsegae established a strategic alliance with local internet giant Naver to expand its logistics capabilities, and acquired eBay Korea in June to secure the third-largest market share in the e-commerce market.
Lotte and Shinsegae are the two largest retailers here but they've been on diverging paths lately. Lotte Group seeks stability by verifying every detail of its plans, which takes longer in decision-making. Meanwhile, Shinsegae adopts a top-down management style that allows its vice chairman Chung Yong-jin to make rapid changes according to market trends.
Lotte Shopping has already missed the opportunities to acquire eBay Korea and Yogiyo in competition against Shinsegae. This gave the impression that Lotte is falling behind Shinsegae in every step of their competition in the e-commerce sector.
Lotte Group Chairman Shin Dong-bin moved up a presidential board meeting two weeks early in July to urge Kang to keep the online business' momentum alive. Lotte ON's market share lags 10 percent behind the average of the top three ― Coupang, Naver and Shinsegae.
Kang said last month that the company might form a strategic alliance with another online retailer ― possibly GS Retail ― or acquire local startups to make an independent breakthrough, but that remains to be seen.
Officials said Shin acknowledged that he is not in an enviable position. He made an inspection recently of Lotte Department Store in Gangnam, Seoul, to observe the latest updates regarding its online shopping-oriented businesses and changes made to its product lines.