Retail in Asia

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Lotte and Shinsegae compete in eBay Korea bid

E-commerce arms of retail giants Lotte and Shinsegae joined the bid, for eBay Korea, hoping a successful acquisition can propel the winning bidder to market dominance.

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However, two out of four preexisting contenders ― local private equity fund MBK Partners and the country’s largest mobile carrier SKT ― dropped their bids at the last minute.

The two potential buyers, along with Lotte’s Lotte ON and Shinsegae’s, had been shortlisted to vie for the acquisition of eBay Korea, the country’s third-largest e-commerce player.

Lotte and Shinsegae have also been showing interest in acquiring eBay Korea despite its US$4.49 billion price tag.

Shinsegae and Lotte both operate online retail platforms focusing on fresh food and luxury items, seeking to compete with top-tier online sales platforms like Naver and Coupang. However, Naver and Coupang are so far ahead of Shinsegae and Lotte that either of the underdogs would have to acquire eBay Korea to compete at the same level.

Naver is the current No.1 player with its market share of 18 percent, followed by Coupang with its share falling five percent behind. Meanwhile, Lotte ON and only hold 5 percent and 3 percent market shares, respectively.

Scooping up eBay Korea’s 12 percent market share can instantly put either party in the top 3 at least. Ebay Korea alone records gross merchandise value (GMV) of US$17 billion annually, and it is the only e-commerce firm to have shown a surplus for 16 consecutive years.

Shinsegae’s online retailer’s GMV has shown explosive growth of 41.4 percent in the first quarter of last year. However, the figure plunged drastically to 14 percent in the same period of this year due to the base effect.

Shinsegae needs a new overwhelming weapon to maximize its strength in the fresh food sector while expanding its business in the open market field to vie with Naver and Coupang. Thus, acquiring eBay Korea is the best option to reach its goal. Here, its strategic partner Naver is said to take part in sharing the 5 trillion won cost burden. In return, the retail giant promised to use Naver’s online payment system on eBay Korea if the alliance successfully takes acquires the e-commerce firm.

Lotte also launched its ambitious online mall Lotte ON combining all six retail subsidiaries under Lotte Shopping. However, its unstable operations led customers to turn their backs on the e-commerce platform and the company has been doing its best to conduct aggressive marketing strategies to revive interest, but to little avail. Lotte could have a shot at a turnaround if it acquires the American e-commerce company.

Still, the US$4.4 billion sales price poses a problem.

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“Retail insiders put the appropriate price for eBay Korea at US$2.6 billion. MBK Partners do not see great merit for acquiring eBay Korea at US$4.4 billion as the American e-commerce player can create little synergy with traditional supermarket Homeplus. SKT signed a strategic partnership recently with Amazon and it is too busy to pursue eBay Korea at the same time,” an industry source said.

(Source: Korea Times )