In Markets

“Big three” retailers in Korea set plans on M&A

coupang

The so-called “big three” retailers in Korea ― Lotte Shopping, Shinsegae Group and Hyundai Department Store ― have been struggling to keep their customers who are rapidly moving to online platforms.

SEE ALSO : How is the retail industry in Korea?

There are several factors contributing to this with one of the biggest being the country’s powerful information technology (IT) industry. The outbreak of COVID-19 in China last December which spread to Korea and saw people quarantining themselves at home accelerated the migration to online shopping causing huge falls in sales for the offline giants.

The big three have launched online platforms, chasing e-commerce firms’ expansionary plans for the limited market in Korea. Korea’s largest online retailer Coupang has been increasing the number of its warehouses, whose total area is equal to that of 193 soccer stadiums. An industry source said that none of the second, third and fourth largest players in the market can compete with this.

To change this, the retail giants are seeking to acquire logistics companies and even one of the big e-commerce players, eBay Korea.

The largest retailer in Korea E-Mart, a subsidiary of Shinsegae Group, has recently been in contact with lead manager of the sale Citi Global Market Securities regarding the purchase of the country’s fourth largest logistics firm Logen.

This is seen as an effort to strengthen its delivery capacity for its prospering online retail subsidiary SSG.com.

As online shopping orders have skyrocketed, SSG.com has an urgent need to expand its logistics infrastructure.

Currently, Logen is 100 percent owned by Hong Kong’s Baring Private Equity, which hopes to sell it for 400 billion won. Shinsegae had already secured 1.7 trillion won in cash as of last year.

Shinsegae Group admitted that it is reviewing acquiring Logen but has not officially made a proposal yet.

One rumor states that Shinsegae is interested in acquiring eBay Korea, valued at 5 trillion won, but Lotte Shopping is a more likely bidder with its 15.57 trillion won in a capital surplus and cashable assets.

eBay Korea is the top player in the online scene by volume of business ― Coupang does not reveal its turnover as it has no obligation to do so.

According to a 2018 Statistics Korea report, the volume of all e-commerce here was 113 trillion won, and eBay Korea’s annual turnover was an estimated 13 trillion, a more than 10 percent market share. It is the only firm that is making continuous profits.

If Lotte Shopping acquires eBay Korea, this could change the whole online retailing game as it would be No.1 in the market.

Another rumor has it that Coupang is eying acquiring eBay Korea.

Coupang has recorded a 1 trillion won deficit over the last two years for an accumulated loss of 3 trillion won.

However, it is continuing to expand its size in the online market to achieve a dominant position.

Coupang had 4.4 trillion won in annual sales in 2018, which far outnumbers eBay Korea’s 1 trillion and the 500 billion won of 11 Street.

However, the company will have to eliminate its competitors to appeal as a dominant player in the world’s fifth largest e-commerce market and list on the Nasdaq.

If it fails to attract investors in the American stock market, it will continue to face a snowballing deficit.

Coupang has denied that it is seeking to acquire eBay Korea.

SEE ALSO : eBay to sell eBay Korea

“Regarding listing on the Nasdaq, we are not even sure if we will go public on the American stock market. Things can change and we could plan an initial public offering here. Again, nothing has been decided,” a Coupang official said.

(Source: Korea Times)

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