October 21, 2009 09:12
Lotte Shopping announced Tuesday that it has agreed to acquire Chinese supermarket chain Times. The acquisition signals moves by the Korean retailer to expand its presence in the Chinese market, and is expected to intensify competition with Shinsegae, its biggest Korean rival, there.
Times has 53 hypermarkets and 12 supermarkets across China. By gaining the 65 outlets Lotte Shopping becomes the 14th largest discount store chain in the world's fastest growing economy, where competition is fierce among major global retailers. French retail group Auchan (132 outlets) is the current market leader in terms of sales, followed by Carrefour (132 outlets) and Wal-Mart (210 outlets). Lotte Shopping aims to rise to the top 10 by 2012 at the latest.
As for Shinsegae, it recently announced plans to increase its E-Mart discount stores in China to 100. E-Mart, the largest retailer in Korea, was the first to penetrate the Chinese market with an outlet opened in Shanghai in 1997. It currently has 22 stores across China, including in Beijing and Tianjin. An E-Mart official says the company's policy of directly training its Chinese staff gives it a solid foundation from which it can expand and eventually dominate the market.
But some industry watchers warn that expansion in China could prove risky if profitability does not grow as well. "The profitability of Korean retailers in overseas markets is only one third of that in Korea. Branching out without solving this problem is like building castles in the air. It could turn into a huge burden," an insider said.
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