Eleven years after landing in the Chinese market, Lotte Mart, a South Korean business giant with the title of "the best retail industry in Asia", finally retreated from China.

On October 15, China Business News reported that Lotte Mart, a retail supermarket under Lotte Group, had announced to sell 93 stores in China to Liqun and Wumart Group, and the remaining 12 stores that could not be sold were also planned to close completely within the year, which meant that Lotte Mart would leave the Chinese market completely.

Lotte Shopping's first quarter report for 2018 showed that its sales in China decreased by 14% year-on-year, with an operating profit loss of 16 billion Korean won (approximately 94.97 million RMB).

Lai Yang, executive vice president of Beijing Society of Business Economics, said in an interview with China Entrepreneur, "The overall business form of global hypermarkets is depressed, and the industry is on the decline.

With the rapid development of e-commerce and logistics industry, shopping has broken the barriers of time and space, and the attraction of hypermarkets has declined. Lotte Mart itself is generally competitive in the market, and it is difficult for enterprises to operate locally. In fact, foreign enterprises, including Wal Mart, have also struggled to survive, such as RT-Mart, which was acquired by domestic enterprise Ali. " He also believes that "Lotte Mart's withdrawal from the Chinese market is essentially a retail revolution".

The most important factor is the operation and management of Lotte Mart itself. Guo Zengli, director of the Development Committee of China Shopping Mall, said in an interview with China Entrepreneur that "Lotte Mart had good policies to enter the Chinese market at the early stage, but its own operation was not well done and its positioning was insufficient, which would undoubtedly lead to the loss of Chinese consumers". He believes that "the strong rise of local supermarket brands and many new ways of playing in the hypermarket field, such as the introduction of fresh food and catering models, are a challenge to the (stereotypical) Lotte Mart."

Guo Zengli also believes that "exiting the Chinese market is a timely stop loss performance of Lotte Mart, because there is no other card to play." In addition, "when it has no more imagination for the future, its development layout and strategic vision will naturally be limited, and innovation will become an adventurous plan B. This is also the general trend, no one can defeat the trend, and exit is a better adjustment based on the existing market environment."

Lotte Mart's life in the Chinese market has entered the countdown. It only took more than a year for the avalanche of retreat from the outbreak of the "Thad incident" to the complete farewell to the Chinese market.

From a high-profile attack to a major defeat

Lotte Mart is a subsidiary of Lotte Group in South Korea that specializes in large supermarkets. As one of the five major groups in South Korea, Lotte Mart once ranked 28th in the world's top 500, second only to Samsung, Hyundai Motor Company, LG and SK. Data shows that Lotte Group's business in China accounts for 29% of its entire territory, and 70% of the total purchase volume of Lotte duty-free stores in South Korea comes from Chinese consumers.

Zeng Gaodiao Enters China

Chinese Entrepreneur learned from Lotte Mart's official website in China that in 2007, Lotte Mart began to expand the Chinese market; In May 2008, Lotte Mart officially entered the mainland market of China, marked by the fact that it swallowed 8 stores in Makro, Beijing. In October 2009, Lotte Mart defeated the local retail giant Wumart Group to conduct a full merger and acquisition of Jiangsu Times Supermarket with HK $4.87 billion (equivalent to more than 6 billion yuan at the exchange rate of that year).

According to public data, Lotte Mart had previously planned to increase its stores in China to 300 in 2018, with sales reaching US $200 billion, making it the "largest retailer in Asia". However, since 2012, Lotte Mart has lacked stamina, closed dozens of stores, and has been trying to find buyers to stop losses. The buyers contacted include Wumart, COFCO Group, Yonghui, RT-Mart, Wal Mart and other enterprises, aiming to sell business in China.

It is reported that after 2013, the sales volume of Lotte Mart in China has gone from bad to worse, with losses ranging from 83 billion won in 2013 to 141 billion won in 2014, 148 billion won in 2015 and 124 billion won in 2016. The losses in four years have reached 496 billion won (about 2.94 billion yuan).

Losing money in consecutive years, selling 93 stores within one month

The 'Sade' incident pushed Lotte's predicament in China to a climax. In February 2017, Lotte Group signed a land exchange agreement with the South Korean government, agreeing to transfer the land of the Xingzhou Golf Course for the deployment of the "THAAD" anti missile system by the South Korean Ministry of Defense. Affected by sanctions and consumer resistance, Lotte Mart's business in China has almost collapsed.

For this reason, Lotte Group underwent two emergency blood transfusions in 2017, with a total amount of 4 billion yuan, stating that it will never give up its business in China.

The first "blood transfusion": in March 2017, Lotte Group of South Korea gave emergency blood transfusion of 360 billion won (about 2.16 billion yuan) to Lotte Mart of China, and its leader was expected to last only until the end of August;

The second "blood transfusion": In August 2017, the South Korean Lotte Group made the second round of emergency capital injection to China Lotte Mart. The amount of this "blood transfusion" was 300 million US dollars (about 1.98 billion yuan).

Unfortunately, this still failed to save Lotte Mart's store in Huamen. According to incomplete statistics, as of April 3, 2017, 87 of Lotte's 99 stores in China have been closed, accounting for about 80% of its total number of stores. The remaining store sales have also decreased by more than 80%. In September 2017, Lotte was forced to decide to sell Lotte Mart Mart's business in China. It is speculated that Lotte Mart lost about 7.04 billion yuan in sales due to the "Thad" disturbance.

According to Lotte Shopping's financial report, in 2017, Lotte Shopping's sales in China were only 634.1 billion won (approximately 3.76 billion yuan), a decrease of almost 50% compared to 1243.7 billion won in 2016.

Influenced by the "Thad" incident, Lotte Mart began to sell its stores in China on a large scale. According to www.haiwainet.com, on April 26 this year, Lotte Mart sold 21 stores in Beijing to China Wumart Group. With the successive sales of stores in North China and East China, Lotte Mart has only 14 stores in central and northeast China.

On the evening of May 11, Liqun Co., Ltd. announced that it planned to acquire two Hong Kong incorporated companies under Lotte Shopping (Hong Kong) Holdings Co., Ltd. and 10 East China incorporated companies. The assets of these companies include 15 properties and 72 stores and other operational commercial assets. The consideration for this transaction is RMB 1.665 billion.

On August 30, Liqun said that the company had completed the relevant industrial and commercial change procedures for the transfer of Lotte Shopping (Hong Kong) Holdings Co., Ltd., and Jiangsu Lotte Mart Mart Commercial Co., Ltd., a subsidiary of Hong Kong Fengjie Co., Ltd., was officially renamed as Liqun Times Commercial Co., Ltd.

Worried internally and trapped externally, leaving with a gloomy exit

The "Thad" incident is just a fuse to accelerate the retreat of Lotte Mart. According to Yicai, in addition to the plight of the Chinese market, Lotte Mart is also facing pressure from the Korean local market:

On the one hand, the pressure comes from the bottleneck period in this market. According to the statistics of the Korea Circulation Industry Federation, in September this year, the average year-on-year growth of the three major warehouse supermarket chains in South Korea (eBay, Lotte Mart, HomePlus) was only 1.5%, reaching the lowest growth value in the same period over the years; And in the previous July, it reached negative growth.

Matching this data is a decrease in the number of stores: since the South Korean government introduced policies such as "Sunday mandatory rest system" and "limited store opening within a certain distance" in 2015 to protect regional business districts, the growth rate of the total number of stores in the three major warehouse supermarket chains in South Korea has slowed down significantly, and even begun to show a negative growth trend.

In addition, the current dilemma of Lotte Mart is caused by the internal strife of Lotte Group. According to media reports, since 2015, the struggle of the founding family of Lotte Group has frequently made headlines in Korean media. First, Rakuten founder Shin Kyuk-ho, with the support of his eldest son, Shin Dong-bin, removed his second son from the position of chairman of the South Korean Rakuten Group, and then Shin Dong-bin returned to the group with the help of his mother, kicking his father out of the holding company. But Xin Dongzhu, the eldest son of Lotte founder Shin Kyuk-ho, was defeated by his younger brother Shin Dong-bin and wanted to cash out. He once threatened that "after most supermarkets close, Lotte Shopping should immediately withdraw from the Chinese market".

Now, Mr. Xin Dongzhu has achieved his wish and Lotte Mart will completely withdraw from the Chinese market. Perhaps, for Lotte Mart, who is worried about internal and external problems, whether it can sell at a good price is no longer the most important issue. It is better to stop losses in time than to lose blood.

'Disobedience to local conditions' is not an isolated example

Lotte Mart is not an isolated example of a retail giant from a brilliant moment to a dismal exit.

The fate of the Korean supermarket company Yibuye also proves that the Sade incident is not a decisive factor. It is reported that eBay Supermarket first entered the Chinese market in 1997. EBay is affiliated with the New World Group, which is the largest commercial circulation group in South Korea and has various formats such as department stores and large comprehensive supermarkets. Easy Buy Supermarket has 70 stores in South Korea, accounting for 32% of the market share in the South Korean market. The number of stores and sales volume exceed the total of Wal Mart and Carrefour in the local market.

However, in the past 20 years, there were only 27 stores in China at most. Even so, eBay did not survive longer than Lotte Mart. On September 11, 2017, eBay announced that it would sell five of its remaining six stores in China to Bufeng Lotus's under Charoen Pokphand in Thailand, and another store would also be sold.

According to Pengpai News, on January 31, 2018, eBay's last store, Wuxi Xishan Dongting, closed before withdrawing from China. Media analysis suggests that the failure to localize stores and brands is the main reason why eBay has withdrawn from China.

Behind the great defeat of these once dominant retail giants, there are reasons such as intensified competition in the Chinese retail market, e-commerce challenges, and global retail market shrinkage, as well as the sadness of their own operations.

It is worth noting that the exit of Yibuye is actually just a microcosm of the setbacks faced by Korean companies in their operations in China. According to media reports, not only supermarkets, but also Samsung mobile phones, Hyundai Motor Company, Korean appliances, etc. are facing such challenges. The deeper reason for the collapse of many Korean companies in China lies in the significant improvement of the core competitiveness of local Chinese enterprises and the rise of local Chinese brands.

However, some people lost Maicheng, while others came with fierce force. International retail giant Costco (China) Investment Co., Ltd. has confirmed that it will open its first physical store in Shanghai. Industry insiders believe that the entry and exit of international retail giants in the Chinese market indicates that in physical retail, high cost-effectiveness and deep experience will become the key to future retail success.