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 structure. With Homeplus Co. customers shifting, E-MART and Lotte Mart are expected to enjoy short-term windfalls, and both companies are accelerating store renovations, delivery services, and strengthening 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 reshaped into a two-strong structure of E-MART and Lotte Mart.
Customer shifts due to Homeplus Co. closures have already been detected in some areas. Homeplus Co. closed 37 of its 104 existing stores last month and is currently operating only 67 stores. Since then, sales at nearby E-MART and Lotte Mart stores have shown an upward trend. Sales at E-MART's Chang-dong and Mook-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 expect competitors' results to improve thanks to demand departing from Homeplus Co. Samsung Securities analyzed that the benefits from Homeplus Co. store closures are 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.
In fact, E-MART and Lotte Mart are on an improving trajectory. On a separate basis, E-MART's first-quarter sales and operating profit this year 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 boosting core competitiveness so the windfall does not end as a one-off. E-MART is pushing to streamline existing stores while expanding its warehouse-type discount chain Traders and strengthening fresh-food and delivery competitiveness in connection with SSG.com. E-MART plans to renovate at least six stores, including Yangjae, Eunpyeong, and Geomdan.
They are also aggressive in competing to attract customers by store or region. Some E-MART stores have engaged in offline marketing, such as sending mailers containing paper discount coupons to nearby households. In an environment where digital marketing is widespread, using direct mail (DM) is seen as a move to secure customers within nearby commercial districts.
Lotte Mart is focusing on fresh-food quality innovation, PB products, and expanding overseas operations. It is also accelerating efforts to strengthen online competitiveness. In the second half, it will operate the Zeta Smart Center Busan, an online grocery-dedicated logistics center using an artificial intelligence (AI)-based automated logistics system, and will expand platform collaboration by introducing a Kakao Shopping grocery service following Naver Plus Membership.
However, it is unclear whether the gap left by Homeplus Co. will lead to a structural recovery across the hypermarket industry. This is because food consumption, which accounts for a significant portion of hypermarket sales, continues to disperse to e-commerce, convenience stores, and super supermarkets (SSM).
Korea Ratings noted that although the departure from Homeplus Co. may bring short-term windfalls 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 results will be how well they can maintain the customer base secured during the market reorganization process and translate differentiated growth strategies into results," adding, "Given the limited growth potential across formats, we should continue to monitor each company's response strategies and execution."