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Can Lotte On compete in the digital market?

Lotte On

Lotte Group Chairman Shin Dong-bin recently said that the future of his retail business depends on the success of its digital transition.

SEE ALSO : Hotel Lotte IPO boosted by Shin Dong-bin

The chairman hopes that newly-launched platform “Lotte ON,” which combines all seven of the group’s online shopping malls, will be a game-changer for the group.

However, the company has some challenges ahead.

First of all, many retail industry insiders point out that Lotte On needs to provide a differentiated service to those of already existing e-commerce platforms.

Lotte ON only gathers existing online platforms such as Lotte Department Store, Lotte Mart and Lotte Home Shopping, allowing customers to compare the prices of the item they wish to purchase.

This open market concept has been adopted by most e-commerce firms for a decade and it gives customers no incentive to use Lotte ON instead of more established online platforms such as Coupang or SSG.com.

Secondly, Lotte Group will have to offer good prices to steal customers from its competitors. However, it is difficult for a listed company to endure a short-term loss to catch up with rival leaders in the market as instant criticism from shareholders will follow.

The additional establishment of warehouses is needed to provide faster and cheaper delivery services. The country’s largest online retailer Coupang owns an overwhelming number of large warehouses compared to that of any of the other top five e-commerce firms. This has allowed the unicorn company to offer the fastest delivery service in the country where customers can receive their purchases in less than 24 hours.

America’s offline retail giant Walmart acquired e-commerce firms like Jet.com and Flipkart and put a vast amount of money into beefing up delivery services in order to compete against Amazon.

Lotte Group is confident about its new online platform business as it plans to utilize offline supermarkets as distribution centers but that is still not enough to achieve Shin’s short-term goal. The chairman aims to treble the online turnover to 20 trillion won by 2023.

Coupang and SSG.com are the biggest opponents for Lotte ON. Although Shin said he does not want his e-commerce business to be directly compared to the money-losing Coupang, it is currently the No. 1 player in the market. No companies in the sector here offer better prices and faster delivery services than Coupang.

The largest offline retailor E-Mart’s SSG.com is another strong rival Lotte ON has to compete against first. SSG.com has already gone through a trial and error process with its online platform service since it launched in 2018 and they have secured loyal customers in the grocery category.

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Lotte ON is likely to face a similar adjustment period and it has to survive in the competition with Coupang and SSG.com to have a chance. Failing to catch up with trends or meet customer demand could put it out of the game.

(Source: Korea Times)

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