Once affected by the COVID-19 pandemic, leading to hundreds of billions of won in losses, Lotte Shopping's retail business in Indonesia is emerging as the company's new cash cow as it improves its revenue and profitability. Lotte Shopping plans to continue its growth by renewing its stores in Indonesia with Korean elements.
According to the Financial Supervisory Service's electronic disclosure system on the 25th, Lotte Shopping's wholesale corporation revenue in Indonesia for the first half of this year amounted to 496.6 billion won, a 4.7% increase compared to the same period last year. This marks the highest revenue ever recorded for the corporation in the first half. During the same period, the net profit was 3.5 billion won, down 53.7% from the previous year, due to the impact of facility investments incurred during the renovation of existing stores to enhance competitiveness.
The wholesale corporation recorded consecutive losses of hundreds of billions of won for three years from 2020 to 2022, during the COVID-19 pandemic. However, it turned profitable in 2023 with a net profit of 11.2 billion won, steadily improving its revenue and profitability while driving its local business.
Lotte Shopping entered the local market in 2008 by acquiring 19 stores of the Dutch-owned Indonesian hypermarket chain Makro for about 360 billion won, making it the first in the Korean retail industry to jump into the local business. Since then, it has expanded to three local corporations (wholesale, retail, and department store).
Lotte Shopping operates 36 wholesale stores in major transport hub areas in Indonesia and 12 retail stores in densely populated metropolitan areas like Jakarta, directly connecting with consumers. This is because the distribution structure, in which small-scale retailers purchase goods in bulk from wholesale discount stores and resell them, has become widespread.
The retail stores, which had historically faced losses, have also made significant improvements in performance. In the first half of this year, the revenue and net loss of the retail corporation were 108.4 billion won and 8 million won, respectively. Revenue increased by 2.5% compared to the same period last year, and the scale of losses decreased by 99.8%. Although the retail store incurred a loss of 8.2 billion won last year, it is expected to turn profitable for the entire year this year.
Lotte Shopping is improving its revenue and profitability through the renewal of stores in Indonesia. It is applying the model of the 'grocery specialty store' that has successfully settled in Korea to local stores.
For example, Lotte Shopping renovated the Lotte Mart Kuningan City branch, which was operated as a retail store, into a K-Food grocery exclusive store in January. It applied a Korean-style store design and created specialized food spaces like 'Cook It World Buffet,' handling over 40 types of global cuisine with a focus on small sizes and cost-effectiveness.
Recently, a new format called 'hybrid store,' which adds the characteristics of retail to wholesale stores, has been introduced. A representative example is the renovation of the Bali wholesale store, which previously operated at 6,600 square meters, into a grocery specialty retail store focusing on Korean groceries and fresh produce at approximately 5,000 square meters.
Ninety percent of the retail store area is filled with food and beverage (F&B) contents, including K-Food, to increase customer dwell time. Although the area of the wholesale store has been reduced to 1,650 square meters, the variety of specialized products for professional customers has increased. Additionally, a dedicated sales team for Indonesian wholesalers has been formed to enhance customer-tailored services.
A representative from Lotte Shopping stated, 'We plan to gradually expand hybrid stores that combine the strengths of wholesale and retail by precisely analyzing the characteristics of the commercial district and customer demand,' adding, 'We will lead retail culture by providing a new shopping experience to both local customers in Indonesia and global tourists.'