Traditional retailers and ecommerce players vie heavily to build up economies of scale

[Photo by Kim Ho-young]

Economies of scale buildup and the race over faster delivery heat up as traditional retailers leverage on their richer networking and capital resources to catch up with ever-evolving e-commerce players.

E-commerce revenue took up nearly 40 percent of Korean’s retail sale last year. Online sales are projected to outsize offline sales for the first time in Korea in 2025.

The country’s traditional retail giants Lotte and Shinsegae have each set 2022 as the year to make a big leap in e-commerce business to narrow the gap with online platform operators by capitalizing on their nationwide retail channels and distribution centers across the country.

In April last year, Lotte hired Na Young-ho, former head of strategic planning at eBay Korea, as the new chief executive of its own e-commerce platform Lotte ON. Lotte plans to enhance its rapid delivery service called “Baro Baesong” that delivers items within two hours after the order is made. Lotte plans to expand the service currently available in Seoul and nearby metropolitan areas to Jeju Island and other parts of the country by the end of this year.

Shinsegae Group that spent 4 trillion won ($3.3 billion in buying the country’s leading online fashion platform W Concept and eBay Korea last year plans to integrate its online and offline services this year. It is seeking to build more delivery distribution infrastructure. In September last year, it set up a large-scale Picking & Packing center that is capable of processing more than 3,000 orders at Emart store in Icheon, Gyeonggi Province. It plans to expand the number of large-scale Picking & Packing centers to 30 by June.

Korea’s leading e-commerce players Naver, Coupang, and Kakao are also planning to upgrade their services to defend their leadership.

Naver and Coupang are bolstering distribution infrastructures this year.

Naver will enhance its online fulfillment data platform Naver Fulfillment Alliance (NFA) service to help its merchant members on its SmartStore platform reduce logistics burden. Coupang also plans to build more distribution centers across the country to expand its Rocket Delivery service. Coupang has so far built more than 100 distribution facilities in 30 locations. The company is currently building additional advanced distribution centers at seven areas including Daegu, Gwangju, and Daejeon.

Convenience stores are also in the race with mobile-based quick delivery service. GS Retail, which operates GS25 convenience store chain, plans to expand its delivery service across the country with Yogiyo, a delivery platform that it acquired last year.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]