Lotte Department Store, which operates the largest number of stores nationwide with 30 locations, is accelerating its restructuring of low-performing stores. Even for stores located in prime areas in Seoul and the metropolitan area, if they are outcompeted by rivals or suffer sluggish sales, the company is taking decisive steps to close them.
According to industry sources on the 2nd, Lotte Department Store is considering operating its Gangnam Star City branch in Jyang-dong, Gwangjin-gu only until October 2028, when its lease agreement expires, and abandoning renewal. It is reported that Konkuk AMC, the asset management company for the Gangnam Star City Mall, is moving forward with selecting a consulting firm to attract a new tenant to succeed Lotte Department Store.
In 2008, Lotte Department Store signed a 20-year lease agreement with Konkuk AMC, paying a security deposit of 118 billion won. The Gangnam Star City branch has operated by configuring approximately 8,000 pyeong (about 26,400 square meters) of retail space and cultural center facilities within the building.
The Gangnam Star City branch is located in a prime area adjacent to Seongsu-dong, which has emerged as a hotspot, and close to the Gangnam district. However, compared to the Main Branch and Jamsil Branch, it has fewer luxury brand stores and a smaller proportion of foreign customers, leading to a declining sales trend. Last year, the total sales (transaction volume) of the Gangnam Star City branch decreased by 2.2% from the previous year to 141.9 billion won, ranking 59th in sales among the company's 65 department store branches nationwide.
Prior to discussions on closing the Gangnam University branch, Lotte Department Store ended operations at its Bundang branch at the end of March this year and decided in August last month to sell its Mia branch to an asset management company. Last year, sales at the Mia branch were 153 billion won, and sales at the Bundang branch were 151.1 billion won, representing decreases of 3.4% and 5.8%, respectively, from the previous year. The Busan Centum City branch, whose annual sales have dropped to the 130 billion won range, may also be put up for sale once consultations on changing the land use are completed.
Lotte Department Store operates more than twice as many stores as its competitors Shinsegae and Hyundai, but with approximately 20 stores ranking below 30th in sales, improving management efficiency has been a major challenge. Jeong Hyeon-seok (CEO), who took office at the end of last year, has focused on operational efficiency and profitability enhancement for the department store business, drawing on his successful experience in restructuring Uniqlo.
Industry observers assess that this trend indicates Lotte is abandoning its multi-store strategy aimed at maintaining its position as the sales leader and instead focusing on cultivating core stores with high profitability. In 2023, Lotte Shopping announced a large-scale renewal plan centered on eight key stores, including the Main Branch, Jamsil Branch, Incheon Branch, and Dongtan Branch.
At the same time, Lotte Department Store is pushing for workforce restructuring. It is conducting its second voluntary retirement program in five years since 2021. Voluntary retirees will receive 40 months' worth of base salary, a re-employment support fund of 20 million won, and children's education funds. The retirement conditions have been significantly improved compared to five years ago, when approximately two years' worth of salary was paid. The company is attempting to transform into a younger organization by reducing the proportion of employees with more than 20 years of service (15 years for GL2 or below) and increasing new hires. While the voluntary retirement program five years ago was strongly focused on cost reduction, this year's initiative is interpreted as a proactive generational shift to lay the foundation for medium- to long-term growth amid favorable industry conditions.
At the end of last month, Lotte Department Store selected artist Jennie (JENNIE) as its brand ambassador. The decision to bring in a new advertising model after 10 years was made to transform the company's image. It was judged that Jennie is suitable for improving the brand image due to her popularity among domestic and international customers in their 20s and 30s, and that this would also be advantageous for entering overseas markets. Jeong Hyeon-seok (CEO) explained the background of the selection by stating, "We will combine the influence possessed by the ambassador (Jennie) with the brand value of Lotte Department Store to make our presence even more distinct in the global market."
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