By Kim Yoo-chul
E-Mart, Korea’s biggest discount chain, is poised to sell off part of its business in China due to heavy losses, which prompted the outfit to sell its stores in the world’s most populous country.
The expectation came of late with the retailer struggling in China without finding big breakthroughs despite a set of its ``customized strategies’’ over the past few years.
On Friday, E-Mart said that it has been in talks with several Chinese firms to sell its stores, a restructuring effort aimed at boosting its efficiency in other areas.
``Recent negotiations to sell about 10 E-Mart stores in China to a local company fell apart. We are preparing to initiate new rounds of talks with a Chinese outfit to sell our outlets in China, including those in Beijing and Shanghai,’’ an E-Mart official said.
``But, we have yet to decide the number of stores to be sold or even the purchaser of the stores as of now.’’
E-Mart, the affiliate of Korea’s runner-up retailer Shinsegae, tapped into China early 1997 and currently has 27 stores mostly in the northeastern region of the world’s No. 2 economy.
E-Mart, whose shares were listed this month separately from Shinsegae this month, maintains 11 stores in Shanghai alone.
In a statement, the Korean retailer said that it is eyeing the uncharted western part of China because its earlier focus on bigger cities including Beijing has been in the doldrums.
It expects that the number of its total stores in China to rise by 45 from the current 27 and said it will reach the break-even point by 2014.
E-Mart is not the sole Korean company that has been extending its losing streaks in China.
Despite the saturation in the local market, a number of Korean outfits invested heavily in China as part of their strategies for future profits.
Although industrial majors such as Samsung, Hyundai, LG and Doosan groups have bolstered their presence there, Taihan Electric Wire and leading portal operator NHN folded their businesses in China.
``The restructuring by E-Mart was another confirmation that even the brand awareness of the nation’s top discount retailer was not enough to compete with existing overseas rivals,’’ said Hong Sung-soo, an analyst at NH Securities.
``E-Mart’s next choice to nurture unexplored territories makes sense, as worries are high over the profitability in consideration of weak consumer spending in the western part of China,’’ said the analyst.
Data from market research from Linkshop said E-Mart ranked 76th out of 100 retailers in China. E-Mart’s local rival Lotte Mart was placed 43rd in terms of total revenues.
``Lotte entered into China a decade later than E-Mart. But Lotte has been seeking corporate growth by acquiring Chinese retailers, while E-Mart has spent heavily based on its self-belief over brand awareness,’’ said an industry official, asking not to be identified.
But shares rose by 1.08 percent to end at 233,000 won on the nation’s main bourse, last week, as investors welcomed the decision.
``E-Mart was making heavy losses in cities like Shanghai as its brand image was very weak there. The sale itself is good,’’ NH’s Hong.
``We see E-Mart to trim losses thanks to the restructuring,’’ the local brokerage said. E-Mart lost 91 billion won in China last year.
NH has presented 300,000 won as its target on E-Mart shares citing itt an attractive valuation considering its business potential.