Offline Home Appliance Retail Stagnation... Lotte Hi-Mart's Breakthrough with Door-to-Door Sales

Regular Shareholders' Meeting on the 20th to Amend Articles of Incorporation
Considering Product Consultation and Recommendation Services at Consumers' Homes
Focus on Enhancing Customer Experience and Diversifying Assembled PC Specifications
Accelerating Discovery of New Revenue Sources to Improve Profitability

Lotte Hi-Mart is planning to amend its articles of incorporation at the upcoming regular shareholders' meeting next week to include the operation of ancillary businesses such as door-to-door sales and assembled PCs. This move aims to find a breakthrough by exploring new business opportunities amid the stagnation of the offline home appliance retail market. With a goal of achieving annual sales of 2.3 trillion KRW and an operating profit of 10 billion KRW this year, the company is emphasizing 'enhancing customer experience,' and attention is focused on whether this new attempt to expand consumer touchpoints will prove effective.

Exterior view of the Lotte Hi-Mart headquarters. Provided by Lotte Hi-Mart

According to industry sources on the 11th, Lotte Hi-Mart will discuss an agenda at the regular shareholders' meeting scheduled for the 20th to add 'manufacturing of electronic, electrical, telecommunications machinery and related equipment, and other related accessories' and 'door-to-door sales and related service businesses' to its articles of incorporation. Among these, the addition of door-to-door sales as a new business purpose stands out. A Lotte Hi-Mart official stated, "The purpose is to improve consultation convenience for customers such as the elderly who find it difficult to visit offline stores directly," adding, "It can be seen as a preemptive response to an aging society." Specifically, home appliance installation technicians or professional consultants may visit homes to recommend related products or introduce highly efficient products, seeking ways to expand purchases.

In the industry, as the subscription economy becomes more active, customers receiving care services regularly meet visiting staff who recommend products suited to the structure or size of their homes, which often leads to additional purchases. A home appliance industry official explained, "When we create touchpoints by visiting consumers' homes, there are more opportunities to introduce various products linked to existing items such as refrigerators or washing machines," adding, "Expanding subscription services also includes the purpose of increasing opportunities to enter customers' homes."

Lotte Hi-Mart has been operating the 'Hi-Mart Safe Care Center,' which provides related consultation services at about 80 stores since 2023, while strengthening home appliance care services. The company plans to add a business model where professional installation technicians or sales promotion staff support door-to-door sales, operating customized services beyond the existing offline store-centered sales strategy.

The manufacturing business of electronic, electrical, telecommunications machinery and related equipment, and other related accessories aims to strengthen competitiveness in the assembled PC sector. Previously, assembled PCs were sold by specifications at stores, but the core plan is to produce various configurations according to customer orders in the future.

Lotte Hi-Mart’s addition of new businesses to its articles of incorporation is aimed at strengthening profitability. The company's sales, which were around 4 trillion KRW in 2020, have continuously declined to 2.3567 trillion KRW last year. Operating profit, which was 160 billion KRW during the same period, turned to a loss of 52 billion KRW in 2022, and last year, due to changes in the standard for ordinary wages following a Supreme Court ruling, it barely recorded a profit of 1.7 billion KRW. This is due to the declining domestic home appliance retail business and increased competition from online purchasing channels.

To overcome this, Lotte Hi-Mart is reviewing new growth engines, such as adding a franchise and franchise business in the form of shop-in-shop that displays home appliances sold by Lotte Hi-Mart in furniture and interior stores, which was added to the articles of incorporation through an extraordinary shareholders' meeting in January. Additionally, the company plans to strengthen after-sales service (AS) for products including global famous brands and expand differentiated products by increasing the proportion of private brands (PB) and overseas brands. A Lotte Hi-Mart official said, "We plan to officially launch a new PB brand, which has been in preparation since last year, as early as April."