All Power United 'Lotte ON'... Will It Become Shin's Winning Move?

Ellotte·Lotte.com and More
Search All Affiliate Products at Once
Planning Managed Open Market
With Strengthened Seller Management

Introducing Premium Paid Services
Finalizing Preparations Ahead of Official Launch

[Asia Economy Reporter Seungjin Lee] As Lotte Group embarks on the largest offline store restructuring in its history, 'Lotte ON,' a core business personally led by Chairman Shin Dong-bin (pictured), is entering its final stages and is set for an official launch. 'Lotte ON' is an integrated online shopping mall that digitalizes all of Lotte Group's assets and is the key project of the 'digital transformation' that Chairman Shin has proposed as a breakthrough in times of crisis.

According to Lotte Group on the 16th, the development of 'Lotte ON' has reached its final phase, and internal discussions are underway regarding the official launch date. Originally, the goal was to officially launch on the 29th, but due to the ongoing COVID-19 situation in South Korea, it was judged that it would be difficult to enjoy the benefits of a grand opening. Therefore, options such as postponing the launch to April or conducting promotion and marketing solely online are also being considered.

Recently, Lotte Group completed preparations for the official launch by revising the terms of use to unify the online memberships of ELotte, Lotte Mart Mall, and Lotte.com into a single membership system. A Lotte Shopping official explained, "Due to restrictions on outdoor activities caused by COVID-19, we are adjusting the official launch timing," adding, "Currently, most of the Lotte ON services are completed and are undergoing stabilization work."

◆ Connecting all Lotte affiliates online = Lotte ON is an integrated online platform where products from all affiliates can be searched and purchased at once. Through this, it aims to connect online and offline channels and complete an 'omnichannel' strategy where all products can be received at nearby Lotte stores. Additionally, Lotte ON plans to triple its online transaction volume to 20 trillion KRW by 2023.

To achieve this, Lotte ON intends to strengthen its 'Online for Offline (O4O)' strategy and simultaneously enhance the competitiveness of existing stores. O4O is a strategy that implements data accumulated online into offline stores to link online consumption to offline sales. Among related services, 'Find Store by Product' and 'Smart Review Search,' which have been conducted by LOB's online mall since 2018, are expected to be expanded across all areas.

Furthermore, Lotte ON will unify the online malls separately operated by subsidiaries such as department stores, marts, supermarkets, and Lotte Hi-Mart, and will also introduce a 'managed open market.' The managed open market will apply algorithms developed by Lotte ON itself to pre-screen seller-registered products and strengthen seller management.

Existing open markets have been criticized for insufficient seller management due to their role as mere intermediaries without responsibility for issues arising during product transactions. In response, Lotte ON plans to operate a trustworthy open market by enhancing the responsibilities of intermediaries. It will also introduce overseas direct purchase and incorporate most of the functions an online mall can offer.

◆ Chairman Shin Dong-bin's ambitious project = Lotte ON is closely related to the ongoing restructuring at Lotte Shopping. Over the past five years, operating profits at Lotte Shopping have decreased to one-third, leading to plans to close about 200 underperforming stores out of approximately 700 offline stores currently operated, including Lotte Department Store, Lotte Mart, Lotte Super, and LOB's, within 3 to 5 years. This is a large-scale restructuring affecting about 30% of all stores.

Chairman Shin has repeatedly highlighted 'digital transformation' and 'Lotte ON' as core businesses of Lotte Group in his New Year's address and recent interviews with foreign media. Following his emphasis on 'digital transformation' in the New Year's address, he urged the executive team to become 'game changers' at the mid-January management meeting this year.

In a recent interview with foreign media, he stated, "Many people have been talking about digitalization but still think centered on store operations," and added, "We will unify internet businesses to create a structure where all products can be received at nearby stores," emphasizing his intention to strengthen online business based on Lotte ON.

Meanwhile, Lotte Group is reportedly planning to introduce a separate service for premium paid members alongside the launch of Lotte ON. It is expected to be similar to the 'Lotte Owners' service introduced last year. Lotte Owners members pay a monthly service fee of 2,900 KRW and can enjoy free shipping 14 times across online malls of seven Lotte Shopping affiliates, as well as receive up to 44% discounts on movie and performance ticket bookings.