What: Lotte and Shinsegae deploy multi-format international growth strategy, targeting Vietnam and Mongolia to offset declining domestic consumption.

Why it is important: This development highlights the evolution of Korean retail groups from domestic powerhouses to regional players, using format diversification as a key tool for sustainable growth in challenging market conditions.

South Korea's leading retailers are aggressively expanding their international presence amid the country's worst domestic retail downturn since 2008. Lotte Department Store is advancing its overseas growth through its next-generation Time Villas shopping complex concept, focusing on Southeast Asian markets, particularly Vietnam. The company's successful track record includes Lotte Mall West Lake Hanoi, which has contributed to a 4.7% increase in overseas sales during the first three quarters of 2024. Similarly, Shinsegae Group is pursuing expansion through its E-mart and No Brand store formats in Southeast Asia and Mongolia, whilst establishing Laos as a strategic base following its Vietnamese operations. The convenience store sector is also showing remarkable international growth, with GS25 achieving a sixty-fold increase in exports since 2017 and planning significant store expansions in Vietnam and Mongolia. CU is following suit with ambitious expansion plans across Mongolia, Malaysia, and Kazakhstan. This international push comes as a strategic response to domestic challenges, including population decline, economic slowdown, and weakening consumer sentiment.

IADS Notes: The current international expansion plans of Lotte and Shinsegae reflect a crucial pivot in their business strategy amid domestic challenges. As reported in October 2024, Lotte had already committed to a substantial USD 5.06 billion investment plan for domestic mall expansion, but the current economic downturn has forced a strategic recalibration. While Korean department stores showed resilience in May 2024 with a combined 3.8% sales growth, November 2024 reports revealed Lotte's acceleration of asset sales and restructuring efforts, highlighting the increasing pressure on traditional retail formats. This context explains the intensified focus on international markets, particularly Southeast Asia, where both Lotte and Shinsegae see opportunities for their diverse retail formats. The expansion of Time Villas and E-mart stores aligns with the broader industry trend observed in February 2024, where Korean retailers began transforming their spaces to emphasise experiential retail and entertainment, suggesting that these companies are not just seeking new markets but are also exporting evolved retail concepts that have proven successful domestically.

Lotte, Shinsegae, seek new markets as domestic consumption slumps