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| A Lotte Mart worker hands over a customer's online order to a delivery driver in a neighborhood in Seoul, Feb. 18, 2021. Courtesy of Lotte ON |
By Kim Jae-heun
Lotte Shopping has decided to reduce the number of delivery vehicles operated by its online shopping mall Lotte On by 20 percent as part of efforts to improve its profitability, company officials said, Tuesday. Lotte Group is a traditional retail giant here, but its e-commerce sector has failed to show substantial results in the past two years since its launch in May 2020.
Lotte On's sales in the first quarter of this year stood at 26 billion won ($20.15 million), down 4.1 percent from a year earlier. Its operating loss grew by 57 percent ― increasing from 29 billion won to 45 billion won ― in the same period.
The limited variety of products sold on Lotte On's platform is attributed as the main reason for the company's poor earnings.
Lotte Shopping had originally planned to combine all seven of its retail subsidiaries including Lotte Department Store, Lotte Super and Lotte Homeshopping and sell their products through Lotte On. However, only three of its affiliates have agreed and the other four have decided to sell their products on their own separate online shopping mall portals.
The paid-membership program for Lotte On also failed to attract new customers. Lotte Shopping tried to entice its existing members from offline to online by combining them, but this plan did not work out the way the company expected.
After two years of sluggish performance, Lotte On decided last month to reduce the number of delivery vehicles it operates from 730 to 559.
"Due to the decrease in volume of online orders after the country's reopening from two years of strict quarantine measures, we have decided to remove one to two delivery vehicles per store in the country to improve company profits," a Lotte On official said.
The online shopping mall portal also stopped its overnight delivery service in April to reduce the accumulating losses. Lotte On believes that it has no chance of surviving in the severe competition of the delivery market, specifically against strong rivals like Coupang, Naver and SSG.com
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