[Exclusive] Emart24 Turns to Deficit... Partners with No Brand Again After 7 Years

Emart24 Reports 23 Billion KRW Operating Loss Last Year
Impact of Increased Investment and Logistics Costs
"Launching New Franchise Model Linked to No Brand"

Emart24 returned to a deficit last year after one year. This year, the company plans to strengthen profitability with a store model led by Emart's private brand (PB), 'No Brand.'

According to Emart's Q4 earnings report on the 16th, Emart24 recorded sales of 2.2252 trillion KRW last year, a 5.1% increase from the previous year. However, it posted an operating loss of 23 billion KRW, turning to a deficit. This marks a return to losses just one year after recording a profit of 6.8 billion KRW for the first time in 2022. Although the company closed about 150 low-profit stores, profitability worsened due to increased investments such as logistics center expansion and rising costs including promotional and logistics expenses, according to the company.

Emart24 had continuously recorded operating losses since Emart acquired its shares in 2013, but posted a profit for the first time in 2022. Although the operating profit was not large, the industry at the time regarded it as a meaningful achievement considering the continuous operating losses after becoming an Emart affiliate. However, in the already saturated convenience store market, the profit structure turned back to a deficit in just one year due to management focusing on expanding scale.

Emart24 plans to break the cycle of losses this year and establish a profit-based structure. The card they have pulled out for this is No Brand. Emart24 had introduced No Brand products in stores since 2016 but stopped purchasing No Brand products in December 2018. This was due to conflicts with Emart24 franchisees as No Brand specialty stores expanded. At that time, the Korea Fair Trade Mediation Agency ruled that opening No Brand specialty stores near Emart24 stores violated the Franchise Transaction Act, and Emart24 focused on developing PB products.

Emart24's decision to prominently feature No Brand products again appears to be in line with the 'price leadership through integration' policy promoted by Han Chaeyang, Emart CEO, who was appointed as a savior last year. Han, who led Chosun Hotel & Resorts, took charge of Emart, Emart Everyday (corporate supermarkets), and Emart24 in the regular personnel reshuffle last September. He emphasized 'restoring core business competitiveness' as his inaugural message and is drafting a blueprint to improve costs through integrated purchasing of products from the three companies and enhance logistics efficiency.

In particular, No Brand is considered a 'cash cow' for Emart. 'No Brand products, which emphasize cost-effectiveness (performance relative to price), received great consumer response as high inflation persisted through the COVID-19 pandemic. Since its launch in 2015, it has maintained a growth trend every year, and although offline businesses such as Emart, Traders, and Emart24 all saw reduced operating profits last year, No Brand was the only one to post an operating profit increase of 142%, recording 33.7 billion KRW and turning a profit.

Emart24 has already started pilot sales of No Brand products at 10 stores nationwide since last month. Emart24 plans to review sales trends at stores currently selling No Brand products to decide whether to expand product categories and their share. Among the approximately 500 stores planned to open this year, some may be configured as No Brand specialized stores. Emart24 plans to newly open 502 stores this year, focusing on locations expected to have high profitability, and close 400 existing stores with low profitability.

Additionally, Emart24 plans to maximize efficiency by consolidating logistics centers. Currently, Emart24 operates 14 logistics centers nationwide, and the plan is to reduce them to 11 by consolidating those concentrated in the metropolitan area. An Emart24 official said, "As the number of stores increases, we will continue investing to strengthen logistics infrastructure in the long term to supply products to franchise stores in a timely manner and operate more efficiently."