Homeplus, which is undergoing corporate rehabilitation proceedings, announced its intention to operate stores normally, but the situation seems to be worsening due to a decline in product assortment. Small businesses located in Homeplus stores are contemplating reducing their operations due to delays in settling sales payments from January and February. Food manufacturers are also increasingly deciding to halt supplies to Homeplus.
If this situation continues, a decline in product competitiveness is unavoidable. Consumers visiting large supermarkets want to buy items at reasonable prices in places with a diverse range of products; however, if the items they wish to purchase are unavailable and price competitiveness is lost, there is no reason for them to visit that store.
An industry insider said, "Just because the supermarket opens at 10:30 a.m. and closes at 10 p.m. does not mean it operates normally. Consumers need to visit, and there must be a variety of items available." They added, "I believe there is a high likelihood that the situation will not flow as Homeplus intends," indicating that although a corporate rehabilitation procedure was applied to lower short-term funding expenses, there is a significant possibility of the company's position as a retailer being shaken.
◇ Ongoing decisions to halt food supplier deliveries… Small stores considering reducing operations
According to the distribution industry on the 6th, the number of food companies declaring a halt to supplies to Homeplus is increasing. Notable companies include CJ CheilJedang, Daesang, Nongshim, LOTTE Wellfood, Dongsuh, Samyang Foods, and OTOKI. LOTTE Chilsung Beverage announced that it will temporarily cease supplies to Homeplus on this day. Dongsuh stated, "There is a possibility of payment issues, so we are not supplying to Homeplus." Paldo also halted supplies. Some companies are considering a halt to supplies. Samyang Foods and OTOKI said, "Payment for supplies is not being processed smoothly, and if it is not normalized in the future, we plan to stop supplies."
Small businesses that are part of the supply chain are contemplating reducing the scale of their operations. The settlement of sales from January and February has not been processed, leading to concerns over labor and ingredient costs going into March. An official from store A said, "They are saying they will give late payment interest, but for a small place like ours, we don't need interest; we need cash immediately. We have to pay salaries and ingredient costs," adding that "the only option left is to redirect products sold at Homeplus to other stores."
An official from store B said, "Even if we want to operate with cash immediately, it is said that it cannot be done because of payment device issues, so the money is stuck as long as we sell," adding that "they said payment will only be made once the court approves it, but no one knows when the settlement will happen. Homeplus intends to reduce store operations."
If this situation continues, it will also be a loss for consumers who want to use gift certificates at Homeplus. If the stocked items are lacking, they will not be able to purchase the items they intended to buy. This implies a decrease in the value of Homeplus gift certificates. On the 5th, affiliated places such as CJ Foodville and Shilla Duty Free stopped accepting Homeplus gift certificates for payments. In response, Homeplus stated, "The proportion of affiliate usage is not large, and payments are possible at Homeplus stores," but if the halt in supplies continues for an extended period, this explanation may only hold partially true.
◇ Homeplus sacrifices interest but damages competitiveness in the retail industry
The direct reason Homeplus applied for corporate rehabilitation is a decline in its credit rating. As the credit rating fell, the cost of funding increased, which led them to seek a resolution through the application for corporate rehabilitation. This is why Homeplus claims that the application for corporate rehabilitation is a "preemptive measure."
However, those in the distribution industry believe that Homeplus's actions are likely to conclude as a case of 'penny wise, pound foolish.' Though the company may save some interest, it will inevitably lose its reputation regarding consumer activities (shopping). If food manufacturers halt supplies immediately, the shelves will be empty. Consumers do not visit supermarkets that lack a sufficient product assortment.
An industry insider noted, "Homeplus has fallen into a situation where it can easily ruin the reputation built over a long time by utilizing expenses and know-how through time-limited sales or discount marketing," adding that "it's only a matter of time before the perception that you can compare products and buy them cheaply at Homeplus is damaged."
A representative from a food company said, "The speed of product distribution is slowing, and we are not actively placing volumes. This is to avoid excess inventory that could come back as unsold products," adding that "we are on high alert to see if consumer footfall will decrease due to this issue."
Homeplus is focused on alleviating anxiety. They emphasize that even when in corporate rehabilitation, business receivables will be handled normally, and they have received court approval. They believe that payment delays will be resolved quickly and that the halt in supplies can also be resolved soon. A Homeplus representative stated, "Payment was temporarily suspended while waiting for court approval on the 4th, but with the commencement of rehabilitation proceedings, payments for ordinary trading receivables have resumed," adding, "We have over 600 billion won in available funds, so there is no problem in making payments for ordinary trading receivables. We will sequentially repay the total amount."