As Homeplus Co. effectively stands on the brink of bankruptcy following a court decision to terminate rehabilitation, the hypermarket market is likely to be reshaped into a two-strong system. As Homeplus Co. customers shift, E-MART and Lotte Mart are expected to enjoy short-term gains, and both companies are accelerating store renewals, delivery services, and the strengthening of private-brand (PB) competitiveness.
According to related industries on the 6th, the Seoul Bankruptcy Court decided on the 3rd to terminate Homeplus Co.'s corporate rehabilitation proceedings. If Homeplus Co. fails to immediately appeal by securing operating funds by the 20th, it will proceed to liquidation. In that case, the domestic hypermarket market is expected to be effectively reorganized into a two-strong structure of E-MART and Lotte Mart.
Customer movement due to Homeplus Co. closures has already been detected in some regions. Homeplus Co. closed 37 of its 104 existing stores last month and is currently operating only 67 stores. Afterward, sales at nearby E-MART and Lotte Mart stores rose. Sales at E-MART's Chang-dong and Muk-dong stores in Seoul from May 10–31 increased 11.4% from a year earlier. Sales at Lotte Mart stores near closed Homeplus Co. locations in Seoul rose an average of 9%. Some stores exceeded a 20% growth rate.
Brokerages say competitors' results will improve thanks to demand departing from Homeplus Co. Samsung Securities analyzed that the benefit from Homeplus Co. store closures is leading to improved same-store sales growth at E-MART. Hanwha Investment & Securities also projected that competitors will benefit from the decision to terminate Homeplus Co.'s rehabilitation.
E-MART and Lotte Mart's earnings are, in fact, improving. On a separate basis, E-MART's first-quarter sales and operating profit were 4.7152 trillion won and 146.3 billion won, up 1.9% and 9.7%, respectively, from a year earlier. Operating profit was the highest for a first quarter in eight years. During the same period, Lotte Mart's operating profit rose 20.2% to 33.8 billion won.
The two companies are focusing on strengthening their core competitiveness so that the windfall does not end as a one-off. E-MART is pushing to streamline existing stores while expanding its warehouse-type discount store Traders and strengthening fresh and delivery competitiveness in connection with SSG.com. E-MART plans to renovate at least six stores, including Yangjae, Eunpyeong, and Geomdan.
Competition to attract customers at the store or regional level is also active. Some E-MART stores have engaged in offline marketing, such as sending mailers with paper discount coupons to nearby households. In a landscape where digital marketing is widespread, using direct mail (DM) is seen as an effort to secure customers in nearby commercial districts.
Lotte Mart is focusing on fresh food quality innovation, PB products, and overseas expansion. It is also accelerating efforts to strengthen online competitiveness. In the second half, it plans to operate the Zeta Smart Center Busan, an online grocery-dedicated logistics center with an artificial intelligence (AI)-based automated logistics system, and to expand platform collaboration by introducing Kakao shopping's grocery service following Naver Plus Membership.
However, it is uncertain whether the gap left by Homeplus Co. will lead to a structural recovery across the hypermarket industry. This is because food spending, which accounts for a significant portion of hypermarket sales, continues to disperse to e-commerce, convenience stores, and supermarkets (SSM).
Korea Ratings said that while the outflow from Homeplus Co. may bring short-term windfall gains to E-MART and Lotte Mart, it is merely an effect of market share redistribution and is unlikely to lead to structural improvement in industry conditions.
Kim Young-hoon, a research fellow at Korea Ratings, said, "In the mid- to long term, rather than the market gap left by Homeplus Co. itself, the key factor determining each company's performance will be how well they can maintain the customer base secured during the market shake-up and translate differentiated growth strategies into results," adding, "Given the limited growth potential across formats, we need to keep watching each company's response strategy and execution results."