As Homeplus Co. scales back stores and faces business disruptions, reshaping demand in Korea's grocery market, E-MART(139480) and Lotte Mart are moving aggressively to defend prices through an "integrated purchasing" strategy that combines order volumes for discount stores and supermarkets (SSMs). With shoppers leaving Homeplus Co. and dispersing to e-commerce, the plan is to draw customers by leveraging price competitiveness consumers can feel.
Integrated purchasing means aggregating the order volumes that each channel, such as hypermarkets and SSMs within the same retail group, used to buy separately, then placing a single order and negotiating prices and supply terms with partners. When purchase volumes grow, retailers can lower selling prices based on economies of scale.
According to the retail industry on the 29th, Lotte Mart and Lotte Super recently increased the sizes of their private label (PB) items "Oneuljoeun tofu" and "Oneuljoeun bean sprouts" from 300g to 400g while pricing them at 980 won, 20 won lower. Lotte Mart and Lotte Super also launched "Oneuljoeun mung bean sprouts (380g)" and "Oneuljoeun soft tofu (350g)" last month at 980 won and 680 won, respectively, using the same approach. To do this, Lotte Mart and Lotte Super combined projected sales volumes to set a target selling price first, then selected product specifications and manufacturers to match, employing an integrated purchasing strategy.
E-MART is also actively using integrated purchasing with E-Mart Everyday to expand its ultra-low-price private label (PB) lineup. E-MART and Everyday added 127 items to the ultra-low-price PB "5K PRICE" in March, bringing the total to 353 items. In the process, they cut prices by up to 70% compared with national brands through integrated purchasing and global sourcing.
In the past, hypermarkets and SSMs managed product purchasing and operations separately by store format. Hypermarkets offered large stores with wide assortments, while SSMs near residential areas focused on everyday essentials suited to small and midsize stores. Because store formats and customer demand differed—and because product codes, onboarding standards, ordering and inventory systems, and logistics structures and management methods also varied by channel—it was difficult to simply combine purchase volumes.
However, after the COVID-19 pandemic, as the grocery market reorganized around e-commerce and high inflation heightened consumers' price sensitivity, the need grew even for hypermarkets to consolidate dispersed purchasing power. Even with nationwide store networks, if hypermarkets and SSMs buy products separately, it is hard to fully benefit from economies of scale that leverage total sales volumes.
In particular, with the market reshaped recently by Homeplus Co.'s slump, many Homeplus Co. customers have been dispersing not only to nearby hypermarkets but also to various e-commerce channels. As a result, there is growing assessment that securing price competitiveness, led by integrated purchasing capabilities, has become more important for hypermarkets.
Cost-saving strategies, including integrated purchasing, are leading to an expansion of items priced "under 1,000 won" that consumers can immediately perceive. Whereas in the past prices were often temporarily lowered through promotions, more items now are being priced at 980 won or 990 won as regular shelf prices.
E-MART's PB items under 1,000 won increased from 14 as of late Aug. last year to 60 now, roughly quadrupling. Lotte Mart and Lotte Super also more than doubled their PB items under 1,000 won from seven last year to 16 now.
An official at a hypermarket said, "Some Homeplus Co. customers are dispersing to nearby E-MART and Lotte Mart, but we believe many have been absorbed by e-commerce," adding, "To keep customers coming, we need prices and product competitiveness that can hold up even against online."