Shin Dong-bin, chairman of Lotte Group, will visit Indonesia at the end of this month representing the Korean economic community, and it appears that Lotte Shopping, the group's retail subsidiary, is on the verge of turning a profit in its local business. Since its entry into Indonesia in 2008, Lotte Shopping has steadily increased its local stores and faced difficulties in turning a profit due to the impact of the COVID-19 pandemic; however, the scale of losses, which reached several hundred won annually, has recently decreased to several tens of won, showing a clear improvement in profitability.
According to business circles on the 21st, Chairman Shin will visit Indonesia from the 28th to the 29th in his capacity as the Director General of The Federation of Korean Industries' economic delegation. This delegation is the first to be sent since the new Prabowo government was launched in Indonesia last October, aiming to expand private-sector cooperation between the two countries. Indonesia, the world's fourth most populous country, has a rapidly growing domestic market based on a large middle class. Last year, Indonesia's gross domestic product (GDP) grew by 5.03%, marking three consecutive years of growth above 5%.
Lotte Group, led by Chairman Shin, primarily engages in retail and petrochemical businesses in Indonesia. Chairman Shin's acceptance of the Director General position for this economic delegation is reportedly due to this background.
Lotte Shopping, a retail subsidiary, entered the local retail market by acquiring 19 stores of the Dutch-owned Indonesian hypermarket chain Makro for approximately 360 billion won in 2008, marking the first participation of a Korean company in the local retail business. Since then, it has continuously opened new stores, operating a total of 48 retail outlets as of the end of 2024.
The department store sector also entered the market in 2013 through the opening of the 'Lotte Shopping Avenue' in Jakarta. This store is a complex shopping mall that houses both a department store and a duty-free shop, marking the first entry of the Korean department store industry into Indonesia and the first overseas city duty-free shop venture by the Korean duty-free industry.
Lotte Shopping currently operates three corporate entities in Indonesia (wholesale discount stores, retail discount stores, and department stores). Among them, the discount store sector has implemented differentiated retail strategies by region, considering the geographical characteristics of Indonesia. Indonesia consists of more than 17,000 islands, with people residing on only around 6,000 of those islands. Additionally, more than half of the population is concentrated on Java Island, which hosts Jakarta and Surabaya.
Accordingly, Lotte Shopping operates retail stores that directly connect with consumers in densely populated metropolitan areas like Jakarta, while primarily managing wholesale stores in other regions. This is influenced by a distribution structure, where retailers operating around the islands purchase goods from wholesale discount stores and then resell them on the islands.
Lotte Shopping, which has aggressively expanded its stores, could not avoid losses during the COVID-19 pandemic from 2020 to 2022. According to Lotte Shopping's business report, the net loss of its three Indonesian subsidiaries reached 124 billion won for the years 2020 (-33.3 billion won), 2021 (-29.1 billion won), and 2022 (-61.9 billion won).
However, recent performance shows a marked improvement. Last year, the sales revenue and net loss for the three subsidiaries were recorded at 1.1219 trillion won and 5.1 billion won, respectively. Sales revenue increased by 1% compared to the previous year, while the loss narrowed by approximately 3 billion won.
The wholesale discount stores recorded sales of 897.9 billion won and a net profit of 9.6 billion won, driving overall performance. The retail discount stores and department store operations reported losses of 8.2 billion won and 6.6 billion won, respectively, with losses decreasing by 800 million won and 3.7 billion won compared to 2023.
Lotte Shopping is also applying its successfully established 'grocery specialty store' from Korea to Indonesia. In January, the company revamped its Lotte Mart Kuningan City branch into a K-Food grocery store. It incorporated Korean-style store design and created specialized food spaces such as 'Cook It World Buffet,' featuring over 40 types of global cuisine along the concepts of small size and cost-effectiveness.
The company also revamped its Gandaria store into a grocery specialty store in January last year, aiming to provide diverse experiences for customers visiting the offline store and elevate the shopping experience.
A representative from Lotte Shopping noted, 'Stores in Indonesia are increasing sales and revenue through renovations, and site selection is also continuously being pursued to open new locations.'