Lotte Backtracks, Focuses on Strengthening Both Online and Offline Foundations

Conservative on Betting Over 3 Trillion Won at Fair Value
Continued Review of Other M&A Deals

The headquarters of eBay Korea in Gangnam-gu, Seoul, on the 17th, where Shinsegae Group is known to be acquiring eBay Korea. / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yuri Kim] Lotte Group, which competed with Shinsegae Group for the acquisition of eBay Korea, has faced defeat. Industry insiders expect Lotte to focus on strengthening its internal foundation by prioritizing the organic integration of online and offline channels for the time being. However, in the rapidly changing e-commerce market, establishing differentiated competitiveness among the 'giants' with economies of scale is seen as the biggest challenge for Lotte going forward.

◆ Lotte "Acquisition Valued from a Conservative Perspective"

Lotte judged that the appropriate price for eBay Korea would not exceed 3 trillion won and thus held back in the final bidding. Before participating in this acquisition battle, Lotte Shopping commissioned consulting from Samjong KPMG and estimated eBay Korea’s fair price to be around 3 trillion won. Accordingly, it is known that Lotte submitted a bid in the low 3 trillion won range without overextending.

The concern over the 'winner’s curse' was also a burden. Even if Lotte succeeded in expanding scale immediately by spending trillions of won, questions remained about generating business synergy by organically connecting eBay Korea, which is predominantly an open market, with its existing businesses. A Lotte Shopping official explained, "During the due diligence process for acquiring eBay Korea, it was found that the synergy with our company was not as large as initially expected, and additional investments and market competition costs after acquisition were also anticipated to be significant, so we calculated the acquisition price from a conservative standpoint."

◆ Strengthening Lotte ON Instead of Acquisition

Lotte is expected to prioritize strengthening the internal foundation of Lotte ON, Lotte Shopping’s e-commerce platform. The market anticipates that Lotte will focus on securing loyal customers in the online market and implementing a 'lock-in' strategy to retain them, while effectively generating synergy among its businesses. To this end, Lotte ON is expected to grow its open market business, which has established a foothold within the platform, and advance its simple payment systems.

Last year, Lotte ON’s transaction volume was approximately 7.6 trillion won, which was only a 7% increase compared to the simple sum of the previous year’s online transaction volumes of seven affiliated companies. To overcome this sluggishness, in April, Lotte appointed Na Young-ho, former Vice President and Head of Strategic Planning at eBay Korea, as the new leader. The position of Lotte ON’s CEO was elevated from executive director level to vice president level, empowering the organization at the group level. Last month, the 'Na Young-ho administration' held the first anniversary event 'Refresh the Whole World,' which was evaluated as a meaningful success, with the number of purchasing customers increasing sevenfold compared to the previous year.

However, challenges remain, including establishing Lotte’s unique differentiation points in the growing e-commerce market and generating synergy with the recently invested secondhand trading platform 'Junggonara.' To this end, Lotte plans to maintain interest in further mergers and acquisitions (M&A). A Lotte Shopping official added, "We will continue to explore ways to create differentiated value to sustain growth in the e-commerce market and will keep reviewing external collaborations, including future M&A opportunities."