[Asia Economy Reporter Seungjin Lee] A mega-commerce company will be born through the merger of GS Retail and GS Home Shopping. The surviving entity after the merger will be GS Retail, and the merger ratio is '1: 4.22 shares,' meaning that for each share of GS Home Shopping, 4.22 new shares of GS Retail will be allocated.
On the morning of the 10th, the boards of directors of both GS Retail and GS Home Shopping unanimously approved the merger agenda, and it was announced that after undergoing regulatory corporate merger reviews and various procedures including the shareholders' meetings of both companies scheduled around May next year, the merger is planned to be completed by July.
GS Retail explained that this merger decision is a preemptive measure to secure an advantage in the fierce survival competition occurring in domestic and international distribution markets by combining GS Retail's strength in offline distribution with GS Home Shopping's strength in online mobile commerce.
Once this merger is completed, a mega single distribution company engaging in both online and offline business will be created, with assets of 9 trillion KRW, an annual transaction volume of 15 trillion KRW, and 6 million transactions per day. GS Retail owns a nationwide network of more than 15,000 stores, and GS Home Shopping operates a mobile shopping app used by over 18 million people along with nearly 30 million TV home shopping viewing households, making it one of the leading distribution network operators in Korea.
GS Retail stated, "In the domestic distribution industry, Lotte Shopping (33 trillion KRW) leads in asset size, Emart (19 trillion KRW) in annual sales, and Naver Shopping and Coupang (20 to 17 trillion KRW) in transaction volume," adding, "Considering the solid financial structure and sufficient investment capacity of the merged GS Retail, it is evaluated to have the potential to become the strongest player in the distribution industry in all indicators within a few years."
This merger is significant not only because it maximizes the purchasing and sales power of both companies but also because the two companies, each with different core competencies in offline and online businesses, will solve each other's challenges and provide a breakthrough for growth.
GS Retail is a powerhouse in offline distribution, owning over 15,000 GS25 convenience stores nationwide, about 320 supermarkets (GS The Fresh), and six hotels including the Grand Intercontinental. Although it has achieved an average growth rate of 10% over the past five years through active store expansion, it has been struggling to find new growth breakthroughs centered on online commerce due to store number stagnation, intensified competition, and the spread of non-face-to-face consumption.
GS Home Shopping, Korea's first and leading TV home shopping company, has successfully transitioned its business to mobile commerce early on due to a decline in TV viewership. However, as large foreign capital and offline-based major players have entered the online commerce market, competition has intensified, and the company has been focusing on finding countermeasures and new growth engines.
The newly formed GS Retail through the merger is expected to accelerate the digital transformation of offline distribution channels such as convenience stores and supermarkets through GS Home Shopping's online commerce capabilities, as well as significantly improve the competitiveness of TV home shopping and mobile commerce through GS Retail's nationwide store network and logistics infrastructure.
This is because the combination with offline stores is a major trend in the online commerce market's competitive advantage, as seen in Amazon, the representative online shopping mall, expanding into offline stores like Amazon Go, Amazon Fresh, and Whole Foods, the cooperation between Naver Shopping and CJ Logistics, and Coupang differentiating its services by combining large-scale logistics and delivery infrastructure.
Synergies of the merged company can also be expected in terms of customer acquisition and product variety. Based on membership customers, GS Retail has 14 million members, and GS Home Shopping has 18 million customers. Even excluding overlapping customers, the customer base grows to about 26 million, and if integrated experiences are provided both online and offline, customer satisfaction can be enhanced. Additionally, the home shopping business strong in fashion, living, and health categories and the convenience store and supermarket businesses strong in fresh food are expected to have complementary effects.
The merger process has been conducted carefully while confirming synergy possibilities through collaboration and test projects. Since the beginning of the year, a GS Distribution Council involving senior executives from both companies has been regularly operated, and cooperative tasks have been derived and executed. For example, wine sold at GS25 stores can be ordered through the GS Home Shopping mobile app, GS Home Shopping's food products are delivered on the same day using GS Retail's cold chain network, and jointly planned products have been launched.
Setting a Vision as a Leader in Online and Offline Commerce Tech with 25 Trillion KRW Transaction Volume by 2025
The merged GS Retail aims to be an "online and offline integrated commerce platform leading customers' lifestyles," integrating online and offline channels and promoting the acquisition of loyal customers and strengthening product competitiveness.
It also plans to realize a "commerce tech leader" by combining IT infrastructure and data capabilities of both companies and evolve into a comprehensive fulfillment business by combining logistics infrastructure and delivery know-how. Additionally, it will actively explore investment opportunities to find future growth engines.
Through the execution of this integrated strategy, the goal is to achieve a transaction volume of 25 trillion KRW by 2025. This represents an average annual growth rate of over 10% from the expected annual transaction volume of 15 trillion KRW in 2020. In particular, focusing on channel integration centered on mobile, the plan is to increase the transaction volume of the mobile commerce channel, currently at 2.8 trillion KRW, to 7 trillion KRW.
Meanwhile, immediately after the board resolution, GS Retail Vice Chairman Hyunsoo Heo and GS Home Shopping President Hoseong Kim shared messages with employees of both companies, expressing the necessity of the merger and their future aspirations.
Hyunsoo Heo, Vice Chairman of GS Retail, said, "Both companies have shared GS's value of being value number one and have strengthened competitiveness in online and offline distribution markets. At a time when the management environment is more uncertain than ever and fierce competition is expected, let's unite the business capabilities of both companies and work together to create greater customer value."
Hoseong Kim, President of GS Home Shopping, said, "Since its founding, GS Home Shopping has repeatedly transformed itself through pioneering the TV home shopping market, popularizing multimedia shopping, transitioning to mobile commerce, and strengthening digital capabilities. The DNA of GS Home Shopping employees who embrace change and continue innovation will grow greatly on a bigger foundation."
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