“Oh? I’ve never seen Gangdong beer before.”
On the morning of the 16th, at the Lotte Mart Cheonho branch in Gangdong District, Seoul, there is a signature product not found in other Lotte Mart locations. It is none other than "Gangdong beer." This beer, created in collaboration with Chuncheon Squeeze Brewery, was launched in a limited quantity of 2,000 cans to celebrate the opening of the Lotte Mart, which began operations in Gangdong District on this day.
A Lotte Mart representative noted, "To celebrate the opening of the Cheonho branch, we developed a refreshing lager beer that pairs well with the local specialty, the jukkumi alley in Cheonho-dong." They added, "Moving forward, we plan to exclusively introduce specialized products utilizing regional content for each store."
The reason Lotte Mart has even created local beer to celebrate this opening is that this store signifies a crucial milestone for Lotte Mart's resurgence. The Lotte Mart Cheonho branch is the first store Lotte Mart has opened in 5 years and 6 months since the Suji branch on Aug. 30, 2019.
◇What happened to Lotte Mart after opening a new store after 6 years?
In 2012, Lotte Mart recorded sales of 9.7 trillion won and operating income of 320 billion won. However, as online shopping began to overshadow large discount stores, it transitioned to an operating loss in 2015 and has continued to show a trend of loss since then.
As a result, Lotte Mart opted for internal management over growth. In 2019, it reduced its store count from 125 to 110 by last year, restructuring its stores to focus on groceries. Instead of opening new stores, it renewed existing ones and tested differentiation through specialized stores such as the liquor-focused store "Bottle Bunker," the grocery-focused store "Grand Grocery," and the pet content-focused store "Coliol Pet Town."
Since November 2022, it started integrating product sourcing from both its supermarkets and hypermarkets, consolidating all organizations except for the sales division to enhance business efficiency.
Through these efforts, Lotte Mart recorded a profit of 48.4 billion won in 2022 and a profit of 87.3 billion won in the following year. According to the securities industry, Lotte Mart is estimated to have generated operating income of around 80 billion won last year. It seems that the profitability slightly declined due to the transfer of Lotte Shopping's e-grocery business to Lotte Mart, which is in partnership with the British retail tech company Ocado.
Industry analysts suggest that as Lotte Mart's efficiency strategy has begun to show some results, it has re-entered the path of external growth. Lotte plans to open its Guri branch in the first half of this year, following the Cheonho branch.
◇Laying the groundwork for grocery specialty stores... Launching the Ocado platform-based app in the first half
The Cheonho branch is located near the Gangdong Millenial Jungheung S-Class apartment complex, close to Cheonho Station on the Seoul subway. The store area is 4,538 m2 (1,374 pyeong), which is about half the size of existing hypermarkets that typically exceed 2,000 pyeong. Instead of having tenant space, it has structured the store solely around grocery products to faithfully implement its main business.
Eighty percent of the store is composed of fresh and ready-to-cook products, while non-food items feature a high-performance private brand (PB) "Today’s Good" set up as a shop-in-shop. Lotte Mart has been operating three shop-in-shops of "Today’s Good," starting with the Dongbusan branch in June last year; in the case of Dongbusan, sales increased by about 15% over the first six months since opening.
In addition, it has introduced the "end-of-the-world product zone" that was previously showcased at Lotte Super to the mart. This area sells high-frequency purchase items at prices more than 20% lower than regular products. It has also expanded offline-only experiences, including "Cooking World Buffet" and "Wine and Liquor Zone," which emphasize cost-effective small quantities.
The Lotte Mart Cheonho branch is expected to face fierce competition, with four large discount stores, including Emart, Homeplus, Hanaro Mart, and Kim's Club located nearby. Lotte Mart noted, "About 170,000 households reside within a 2 km radius of the Cheonho branch, providing a rich customer base, and with the start of redevelopment and reconstruction in the area since last year, the market growth potential is high."
Starting with the Cheonho branch, Lotte Mart plans to accelerate its strategy for becoming the "number one grocery market." In the first half of this year, it will introduce an e-grocery application called "Lotte Mart Zetta" based on the Ocado platform. It plans to establish an automated logistics center utilizing Ocado technology in the first quarter of next year to fully activate its online grocery business.
Kang Seong-hyun, CEO of Lotte Mart and Lotte Super, stated, "The Cheonho branch serves as the standard for a new generation of grocery specialty stores that faithfully implements customer value based on Lotte Mart's core competence in grocery content." He added, "Alongside the merger of the mart and supermarket divisions and the transition to grocery specialty stores, we will achieve both quantitative and qualitative growth through the expansion of the mart and supermarket operations to become the 'number one grocery market.'"