While Walmart expands in China, Brazil, and Mexico, a Korean conglomerate, Lotte, is aggressively moving forward with the launching of their department stores, discount stores, and supermarkets in emerging markets within the VRIC nations of Vietnam, Russia, Indonesia, and China.
The JoongAng Daily reports that Lee Chul-woo, the president of Lotte Shopping Co., has announced that he aims for Lotte Department Store to be among the world’s top 10 by 2014. In revealing the company’s eight-year plan for the flagship retail unit, he noted that they are currently ranked 13th in the world, with 2009 revenues of US$7.73 billion.
Lotte’s ambitions extend not only to their department stores, but to their chain of discount stores (or supermarkets), Lotte Mart, as well. An emerging competitor with Walmart, Lotte Mart has 184 branches, about 100 of which are overseas, with more planned globally. They are known for their success in the VRICs, and their expansion in these regions has been bolstered by M&As, especially in China and Indonesia.
According to the Jakarta Post, the Lotte group announced that it would be investing US$870 million in the Indonesian market within four years in order to become a leader in the country’s lucrative retail market. They acquired Makro Indonesia, a Belgium-based warehouse club (cash and carry wholesaler), in 2008, and are moving forward to become one of Indonesia’s top retailers.
Daniel Surya, chairman of dm-IDHolland, IDHolland group, offered some insights. “Makro was acquired by Lotte Mart in Indonesia recently,” Daniel says. “Makro was set to tap into the wholesale retail market with attractive bargains, but this wasn’t successful, as the stores are located far from the city where other players like hypermarkets Giant and Carrefour are more convenient for consumers to reach.” Daniel also mentions that Makro was known as a “low price and large quantity purchase” store, like Walmart or Sam’s Club. In Indonesia, Carrefour and other hypermarkets are located inside the city, often teamed up with shopping malls. To maintain a balance with other small- to medium-sized enterprises, they don’t operate outside of the city .
Lotte Mart’s challenges in the Indonesian market have just begun. True to their word, they recently launched their hypermarket in the Gandaria City Mall, a modernized mall that is the biggest in South Jakarta.
Lotte Mart is also looking to improve their business in Vietnam. Byung-Yong Noh, CEO and president of Lotte Mart Co., Ltd., said that after 18 months of operating their first store in Ho Chi Minh City, they have realized that the Co.opMart store chain, Vietnam’s leading retail store, is a favorite shopping destination for Vietnamese consumers.
Lotte Mart is showing interest in cooperating with Co.opMart’s operator, Saigon Co.op. Lotte Mart launched its first Vietnam branch in 2008; there are currently only two branches. However, they are planning on expanding their business by launching up to 30 retail centers by 2018. Saigon Co.op has 45 Co.opMart retail outlets today, and their plan is to have 100 by 2015. It seems that Lotte Mart has found the right partner for their marketing in Vietnam.
The Lotte group is also planning to build a “Lotte Center” complex consisting of a department store, a hotel, an office space and others in Hanoi, Vietnam, in 2013 as part of their increased investment in the Vietnamese market. Much like Indonesia, this is a key market for them if they are to become a global retailer.
In their “Vision 2018,” the Lotte group has set a target of US$18.9 billion for their retail sales, most of which will come from their overseas stores. Like other economic powerhouses, Lotte is foreseeing that their domestic market will soon be saturated. Becoming a global player is something they need to do, not just something they want to do.
From a branding point of view, Lotte Mart may need to consider making their brand more strategically visible than it is now if they are to become a global brand like Walmart and other international retailers. It will be interesting to see how their big leap to become a global player and retail brand plays out.