Lotte Himart transforms into comprehensive appliance care company

[Courtesy of Lotte Himart Co.]

Lotte Himart Co., a major retailer of household appliances in South Korea, is expected to transform into a comprehensive appliance care company, offering lifetime management services for customers’ appliances.

Lotte Himart plans to provide services such as cleaning, maintenance, and insurance for repairs of air conditioners and refrigerators. The move comes as a strategic response to the shrinking offline appliance market driven by the country’s population decline and the rise of e-commerce platforms.

This service-oriented model aims not only to generate continuous revenue for the retailer but also to foster customer loyalty by ensuring appliances are meticulously cared for throughout their lifecycle, thereby increasing the likelihood of repurchases.

According to the Financial Supervisory Service (FSS) disclosures on Tuesday, Lotte Himart reported an operating profit of 8.2 billion won ($6 million) last year.

This marks a significant turnaround just a year after posting its first-ever loss of 52 billion won in 2022.

However, the profit is still a fraction of the 106.8 billion won earned in 2021. Last year’s sales dropped over 20 percent to 2.61 trillion won, continuing a three-year decline from 4.05 trillion won in 2020.

Market watchers attribute the downturn in the offline appliance market to a decrease in major life events that traditionally spur large appliance purchases, such as weddings and moving.

Lotte Himart’s strategy to navigate through market challenges involves positioning itself as a lifetime appliance company, aiming to secure service revenue and foster repurchases by providing dedicated care to customers over the typical 7-10 year lifespan of major appliances.

Since 2016, Lotte Himart has been operating an appliance cleaning service, executed by its team of professional masters who dismantle, clean, and sterilize appliances.

The scope of services has expanded to include more than 50 items, ranging from air conditioners, kimchi refrigerators, washing machines, clothes dryers, and garment care appliances to home cleaning services like move-in cleaning, sick building syndrome solution, and bathroom cleaning.

Lotte Himart also offers extended warranty insurance products.

While manufacturers typically provide a basic 1-2 year warranty, Lotte Himart allows customers to extend this period for a one-time insurance fee ranging from 7,000 to 70,000 won, with a compensation limit of up to 5 million won for service claims.

The expansion into service sales has reportedly played a crucial role in Lotte Himart’s swift profit recovery last year from an operating loss in the previous year.