“I think the reason why there are sluggish business groups even though they were the first in the industry was a matter of execution, not strategy. In response to digital transformation, digital transformation (DT) and research and development (R&D) investments are essential, and strategy-matched execution is essential for investors to pay off.”
Lotte Chairman Shin Dong-bin criticized last year’s sluggish management index at the first presidential meeting this year. Chairman Shin said, “Our potential is not recognized in the market. Just as companies that innovate during a crisis have a large growth rate after the crisis, we must thoroughly prepare for when the pandemic stabilizes after the second quarter of this year.” Emphasized. Lotte’s presidential meeting is a meeting where executives from affiliates gather in the first and second half of each year to share mid- to long-term growth strategies.
Chairman Shin rebukes “What is the core value of each company”
According to Lotte on the 14th, Chairman Shin’s speech was made for 30 minutes at the end of the four-hour meeting. At the president’s meeting held on the 13th, Chairman Shin asked the question “What are the essential competitiveness and core values of each company?” and ordered, “We must be able to present the company’s appearance to employees in 5 and 10 years.” . He emphasized, “Only if there is a clear vision and discriminatory value for each company, success can be achieved,” he emphasized. “There is no future or meaning for a company that is obsessed with survival or past success experiences.” “Companies that are not transforming innovatively should consider drastic portfolio adjustments,” he said. Since then, they have ordered continuous investment and bold execution power.
It is an analysis that Chairman Shin’s remarks are based on the sluggish distribution industry, which is rapidly turning to e-commerce. At Lotte, the distribution division is the parent of the group and is the flagship business that accounts for nearly 40% of the total business. However, amid the rapid growth of e-commerce companies such as Coupang, the distribution market has undergone cataclysmic changes, and results have been sluggish due to last year’s Corona 19. The competitiveness of existing offline stores has weakened, and the e-commerce sector, which has been belatedly jumping, has failed to produce such results.
In particular, the integrated online mall Lotte On was launched ambitiously saying that it will invest a total of 3 trillion won in April last year, but its dominance in the market is not yet great. According to the mobile big data platform Mobile Index, as of December last year, Lotte On’s monthly application users reached 1.12 million, which is 5.2% of Coupang (2.141 million), the number one. In May (960,000 people) right after the launch of Lotte On, monthly users decreased, and the recent large-scale discount events have barely turned to growth.
Lotte’s performance is also compared with Shinsegae, an offline competitor and a latecomer in e-commerce. Shinsegae’s Shp.com sales increased by more than 40% in December last year, but the growth rate of the food group alone exceeded 60%. This is an achievement that E-Mart has strengthened its food group since 2017. Shinsegae Department Store was also listed in 5 out of 9 department stores nationwide that grew last year through the enlargement of luxury goods and stores despite the adverse conditions of Corona 19. On the other hand, Lotte’s sales at all stores other than the Incheon Terminal store decreased.
Rapid change in the distribution market… Lotte’s’strengths’ must be saved
Lotte has recently declared an emergency situation and is tightening the belt. In February of last year, after announcing a restructuring plan to rearrange 200 out of 700 offline stores, it closed 114 stores and fewer 1994 employees in 10 months. As fixed costs decreased and demand for daily necessities increased, net profit turned to a surplus of 3 billion won in the third quarter of last year. In the year-end greetings conducted earlier than usual, the number of executives was reduced by 100, and executives in their 50s were placed forward. However, last year’s performance is difficult to exceed the previous year.
Lotte’s distribution division is regarded as an urgent need to recover competitiveness. Park Hee-jin, an analyst at Shinhan Financial Investment, said, “It is necessary to establish the identity that Lotte department stores and marts each pursue.” Pointed out.
Reporter Chu In-young [email protected]