What: Korean retail market shows growing polarisation as Lotte achieves 44.3% profit growth while competitors struggle with declining sales and profits.

Why it is important: This trend demonstrates how traditional department stores must balance domestic restructuring with international growth to remain competitive, as evidenced by recent success stories in the Korean market

South Korea's retail landscape is experiencing significant divergence in performance, with Lotte Department Store emerging as a notable success story amid broader market challenges. The company achieved an impressive 44.3% year-on-year operating profit increase to 130 billion won in the first quarter of 2025, despite a slight 1.1% revenue decline. This performance stands in stark contrast to competitors Shinsegae and Hyundai, who saw profit declines of 5.1% and 5.7% respectively. Lotte's success stems from a dual strategy of aggressive domestic cost-efficiency measures and robust international operations, which saw a 6.2% revenue rise. The market polarisation extends to the big-box retail sector, where E-Mart's revenue surged 10.1% to 4.63 trillion won, while Lotte Mart struggled with minimal growth and declining profits. Political instability, trade uncertainties, and adverse weather conditions have further complicated the retail environment, making strategic adaptation increasingly crucial for survival.

IADS Notes: The current market dynamics in Korean retail reflect broader transformative trends identified in recent months. As reported in January 2025, major retailers like Lotte and Shinsegae have been actively seeking new markets amid domestic consumption decline, with Lotte's successful international expansion showing a 4.7% increase in overseas sales. This strategy aligns with the company's October 2024 announcement of a 7 trillion won investment plan, demonstrating its commitment to modernisation and efficiency. The market's increasing polarisation was evident in January 2025 data, showing successful stores achieving 5% growth while others declined by 3.3%. This divergence is further emphasised by Shinsegae's November 2024 strategic decision to split its department store and E-mart operations, recognising the distinct dynamics of different retail formats. E-Mart's successful pricing strategies and Lotte's efficiency measures highlight how scale and strategic positioning have become crucial factors in maintaining competitiveness in the evolving Korean retail landscape.

Korean retailers struggle amid sluggish demand