The Chinese Direct Purchase Market Is Tough... Top 3 Distributors Are Leaving One After Another

Tmall Global Sales Slump
Emart Closes Specialty Store After 6 Years
Lotte Mart Also Shuts Down... Hyundai Department Store Halts Global Section
AK Plaza Finds Solution Through Live Broadcasts

It was confirmed on the 28th that Emart has closed its specialty store, which had been operating for six years on Tmall Global, Alibaba Group's B2C (business-to-consumer) cross-border shopping mall in China. The photo is a captured image of the notice announcing the closure of Emart's specialty store.

[Asia Economy Reporter Cha Min-young] "Direct entry into China is not easy"

In the past, the Chinese local online market, once called the "dream market" for domestic companies, has seen the retail industry's "Big 3" ? Lotte, Hyundai, and Shinsegae ? consecutively surrender and withdraw.

According to the industry on the 28th, Emart recently closed its specialty store on Tmall Global, Alibaba Group's B2C (business-to-consumer) cross-border mall in China, which it had operated for six years. After opening in mid-March 2015, it achieved initial success with sales of 8 billion KRW within a year, but sales and operating profits declined afterward, leading to the difficult decision to close. Shinsegae Department Store, part of the same group that opened a specialty store on Tmall Global in 2017, also withdrew. Emart's private brand (PB) "No Brand" entered Tmall Global in June but has not met expectations.

Lotte Mart, which established itself on Tmall Global alongside Emart in 2015, closed its store in January 2017, less than two years later. At that time, Lotte Mart explained that due to poor sales on Tmall, it decided to focus on its own online site, Global Lotte.com, to revitalize its Chinese e-commerce business. Hyundai Department Store Group also opened its own mall, Hyundai H Mall Global, in 2014 but temporarily suspended operations around April last year and eventually closed it, judging that operational efficiency had declined after selling products in 50 countries worldwide for five years.

The only company standing out in the Chinese cross-border e-commerce market is AK Plaza, a department store under the Aekyung Group. The AK Plaza specialty store on Alibaba Tmall Global, which opened in June 2016, currently has 180,000 followers. Since September last year, it established the first Tmall broadcasting booth at its Suwon branch, and in May this year, it opened the first Tmall broadcasting room in the distribution industry at its headquarters building. It broadcasts for more than six hours daily, and with the upcoming major sales event, Singles' Day in November, it now broadcasts over 10 hours a day. This year's Singles' Day sales target is set to increase by 70% compared to last year.

An industry insider said, "Alibaba Tmall Global has high intermediary fees, and when advertising and marketing costs are added, high sales must be achieved," adding, "Domestic retail companies entered online malls after seeing Chinese group tourists buying red ginseng, rice cookers, and processed foods at domestic department stores and marts, but local purchasing trends have drastically changed, making it difficult to respond to these changes." Another industry source said, "Not only must companies go through intermediary agencies when entering, but they must also receive continuous management afterward to meet Tmall's strict operational regulations," and added, "Moreover, in China, products that become hits require a rapid increase in order volume in a short period, which is challenging for distributors rather than manufacturers."