[Exclusive] GS Retail, Moving to 'Cut Excess Fat,' Also Withdraws from Indonesian Home Shopping

GS Retail to Liquidate Indonesian Home Shopping Subsidiary
Withdrawal After 12 Years Since Entering Indonesia in 2012
Supermarket Business Continues Losses... Store Expansion Faces Challenges

GS Retail has confirmed that it has exited the home shopping business in Indonesia. The company had established a corporation in Indonesia to operate home shopping and supermarket businesses, but due to continued poor performance, it has begun restructuring its operations to improve profitability.

According to the distribution industry on the 18th, last year GS Retail completely divested its stake in the Indonesian joint venture ‘MNC GSHS (GS Home Shopping)’. This joint venture was established in 2012 with Indonesian media group GMC to operate home shopping in Indonesia. Currently, local home shopping broadcasts have been suspended, and discussions are underway among shareholders regarding the liquidation of the corporation. A GS Retail official stated, “It is true that the home shopping business has been discontinued,” adding, “We are discussing liquidation methods, but the process is not yet complete.”

GS Tower in Gangnam-gu, Seoul, where the GS Retail headquarters is located. (Photo by GS Tower website, not directly related to the article.)

Exiting Indonesian Home Shopping After 12 Years

GS Retail first entered Indonesia in July 2012 during its GS Home Shopping days before the merger. It acquired a 40% stake for 3.4 billion KRW to establish the joint venture. At the time, the company evaluated Indonesia as highly attractive for investment due to its ranking as the 4th largest country by population and its high GDP ranking in Southeast Asia. This was a period when GS Home Shopping was accelerating its overseas expansion by establishing corporations for management participation in India, Thailand, Vietnam, China, and other countries.

However, the results did not meet expectations. The business was effectively suspended last year, so no performance was recorded. As of 2022, sales were 5.3 billion KRW, net loss was 1.6 billion KRW, and net assets were negative 2.7 billion KRW, indicating a capital deficit. In 2021, a year earlier, sales were 12.3 billion KRW, net loss was 1 billion KRW, and net assets were negative 1.3 billion KRW, showing an accumulation of losses. This is analyzed to be influenced by the global decline in the influence of TV channels, including in Korea. The ordering method, which was centered on TV and PC, shifted to mobile, weakening the competitiveness of home shopping channels.

The bold decision to liquidate the corporation without additional investment aligns with GS Retail’s business policy of prioritizing profitability. GS Retail has recently been undertaking a slimming-down process by exiting underperforming businesses. In the past, GS Retail had set a goal to invest 1 trillion KRW to secure new businesses and expand its investment portfolio.

However, as the number of affiliates with poor performance increased over several years, it was judged that profit improvement was urgent. In fact, last year, GS Retail decided to withdraw from the online mall GS Fresh Mall and sell TenbyTen. Regarding the home shopping business, it has already completed liquidation of its corporations in Malaysia, Russia, and Vietnam. The industry expects that, given the bleak outlook for TV home shopping, the remaining overseas operations will also enter liquidation procedures.

Unprofitable ‘Supermarkets’... When Will They Turn a Profit?

The supermarket business is also struggling. It has been eight years since the first store opened in October 2016 after establishing the Indonesian corporation in 2014, but clear signs of performance improvement are hard to find.

GS Supermarket Indonesia Corporation (PT. GS Retail Indonesia) recorded sales of 20.2 billion KRW and a net loss of 4.4 billion KRW last year. The net loss doubled compared to the previous year. Although it achieved an operating profit turnaround in 2020, it reverted to losses and has been receiving poor performance results every year. The number of stores has gradually increased to nine, but sales remain stagnant.

As losses have prolonged, the financial condition has deteriorated. The book value of the corporation’s land is currently zero, and the building is valued at 65 million KRW. This reflects impairment losses recognized due to the decline in asset value. Last year, the corporation also entered into a monetary loan agreement borrowing 2.5 billion KRW from GS Retail. This was done at the request of the local corporation to secure operating funds.

The industry expects that it will take more time for the supermarket to turn a profit. Lotte Mart, which entered the local market eight years earlier than GS Supermarket and operates 48 stores, only achieved a slight operating profit turnaround last year. Its net income is still in the red.

Indonesia consists of hundreds of islands, and it is reported that the logistics hub network is not fully established, making business expansion difficult. A distribution industry insider familiar with the Indonesian market said, “There is a habit of purchasing from retail stores like general supermarkets as needed, so many people are not accustomed to shopping at large marts,” adding, “The regions where purchasing power is relatively high are limited, so expansion will not be easy.”

Previously, GS Retail announced plans to open 20 stores by 2025 through a strategic partnership (SI) with the local company Gudang Garam.