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This in-depth guide to South Korea explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

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Asian private-equity firm MBK Partners withdrew a planned Homeplus property float due to weak interest.

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Europe-based buying alliance EMD has announced that South Korea-based Homeplus will join the organisation. EMD said Homeplus will initially work with EMD on the ‘sourcing of private label products’, but noted there is scope for ‘the option of cooperation in other areas of intercontinental cooperation’.

Homeplus to expand EMD’s global membership

Following the addition of Homeplus, EMD will have members in 20 countries, and will mark its third partner outside Europe, adding to Australia-based Woolworths Ltd and New Zealand-based Progressive Enterprises. Homeplus generated a turnover of US$9.7bn in 2017 and operates 752 stores across hypermarkets, supermarkets and convenience stores.

Partnership to provide opportunities for private label suppliers

Commenting on the partnership, Homeplus’s chief executive, Lim Il-Soon, said: “We cannot imagine a better cooperation partner than the successful and worldwide well-connected EMD. The close cooperation in the private label business opens for us new and interesting purchasing channels in Europe with an immediate benefit for our customers. Additional growth opportunities will also result for our South Korean suppliers, for which new sales channels in the large distribution area of the EMD members will be made available.

 

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Korean hypermarket and convenience retailer, Home plus, has opened a new format Home plus Special store in Daegu.

Reinventing its big-box stores

Home plus first announced plans to open new warehouse stores in April. The retailer has now converted a Home plus store in Daegu to its new hybrid wholesale and hypermarket format. Home plus Special targets individual shoppers but also businesses that buy in bulk.

More conversions expected

The retailer plans to covert 15 branches to Home plus Special stores this year. Home plus will hope that its latest initiative will help its hypermarket sales recover, particularly as its Express and 365 Plus convenience stores face stiff competition from the likes of  GS25, CU, 7-Eleven, Emart 24 and Ministop.

 

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We review the latest developments at E-Mart, Lotte, Home plus and GS Retail, the four largest food and grocery retailers in South Korea.

Pepper the robot at E-Mart

E-Mart is working with Japan's Softbank Robotics Corp to test 'Pepper' the robot. 'Pepper' will be stationed at an E-Mart store in Seoul for about three weeks to service shoppers in store. The 1.2m-tall robot will be able to provide product information, answer frequently asked questions and promote items on sale. Pepper first appeared in SoftBank's Ginza store in Japan a few years ago. Its sophisticated functionality creates new opportunities to interact and engage with customers in store. 

This follows the recent trial of Eli, smart shopping trolleys that automatically follow shoppers and help customers browse items. The company is also working with Seoul National University on a joint research project in relation to auto-driving robots in retail. Having pulled its stores out of China, E-Mart signed a deal to return via SPAR by supplying food, personal care and household products.

...Q1 results highlight key growth areas

In the first quarter, E-Mart's top line sales grew 5% to KRW37.2bn compared with the same period last year. Hypermarket sales for Q1 were flat, while the retailer's traders and online operations grew 30.4% and 24.6% respectively. Investment in technology and the development of private labels have been and will continue to be key focus areas for the retailer.

Lotte streamlining at home and overseas

Lotte is trying to sell its Anyang department store. The deal with Enter Six will either sell or transfer the lease rights on the store. The Anyang store is 20km from Seoul, but only 3km from Lotte's Pyeongchon branch and is set to be offloaded due to poor sales performance.

Lotte recently exited its Lotte Mart operations in Beijing and will now sell its stores in Shanghai and nearby areas to Liqun Group for approx. KRW280bn (US$262m). This will leave the retailer with 14 Lotte Mart stores left in the country as it presses ahead to sale its affiliate stores within the first half of this year.

After a challenging FY2017, the retailer will continue to focus on profitability at home (like E-Mart) and in markets like Indonesia and Vietnam, where its operations have shown more encouraging signs of growth.

Home plus to establish REIT?

In 2015, private equity firm MBK Partners bought Home plus from Tesco PLC for US$6.1bn. The retailer revealed plans to open 10 new warehouse outlets stores called 'Home plus special' last month. It is said to be considering the possibility of establishing a real-estate investment trust (REIT) that could acquire around 40 Home plus hypermarkets. If the move goes ahead, Home plus may use IPO proceeds to renovate stores, pay of any existing debt and operate its stores under long-term lease contracts.

GS Retail localising its offer in Vietnam

Last year, GS Retail opened its first GS25 c-store in Vietnam. The retailer is now in talks with Vietnamese producers to localise offerings as it looks to add 30 more GS25 stores this year. It will also look to promote Korean items in Vietnam and take a stronger selection of Vietnamese foods back to Korea.

The retailer also supplies private-label products in Singapore and Taiwan and hopes to expand out to four further markets this year. With the convenience channel growing rapidly in Vietnam, GS Retail has also outlined ambitious expansion plans to reach 2,000 outlets in the country within the next decade. 

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Home plus in South Korea has revealed that it will open 10 new warehouse outlet stores called 'Home plus special'.

New format a hybrid of wholesale and hypermarket

The new stores will be conversions of its 10 discount stores and are likely to be a hybrid format combining the best elements of a wholesale format, with that of a hypermarket. CEO Im Il-soon was clear to point out that Home plus' strategy was not to replicated that of E-mart Traders, the warehouse format of the market leading retailer, but to differentiate itself and create a store that could enable a complete shopping experience. The first three stores to be converted will be Home plus stores in Mokdong in Seoul, Daegu and Seobusan in Busan. 

Private label to play a more important role

Home plus also intends to enhance its private label brands, Simplus and All About Food, in order to better compete with E-mart and Lotte Mart. As part of this, the retailer plans to partner with retailers in 10 European countries to improve its global sourcing and distribution network, although it did not share further details.

Home plus setting out its strategy

Im Il-soon became CEO of Home plus last October and is the company's first female CEO. Under her stewardship and following its seperation from Tesco, the business has been in a transitional period and is gradually starting to re-establish its future direction. New formats and better ranges are clearly a priority, as it looks to compete with the other heavyweights in the market, E-mart and Lotte Mart.

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