[The Editors' Verdict] The End of Homeplus

Shift of Consumer Focus to Online Shopping
Workforce at the Three Major Supermarket Chains Drops by Over 10,000
Homeplus Sees the Smallest Reduction in Employee Numbers
Labor-Management Conflict Ultimately Threatens Jobs

The 2014 film "Cart" highlighted the mass layoffs of female non-regular workers at Homever, the predecessor of Homeplus. The movie was inspired by the true story of a 500-day strike that erupted when the E-Land Group, which operated Homever, conducted large-scale layoffs of non-regular supermarket workers ahead of the 2007 implementation of the Non-Regular Workers Protection Act, creating a significant social impact. Homever was acquired by Homeplus, a joint venture between Samsung and the British retail company Tesco, in 2008. This is why there was strong negative public opinion regarding worker layoffs when the private equity firm MBK acquired Homeplus in 2015.

The large supermarket industry faced strengthened distribution regulations such as mandatory holiday closures starting in 2013 and a shift in consumer focus to online shopping, leading to significant staff reductions to cut costs. However, Homeplus saw a relatively smaller decrease in employees. An analysis of business and audit reports from 2014 to 2023 for the three major supermarket chains by this publication found that Emart reduced its workforce by 5,214 employees, the largest decrease. Lotte Mart reduced by 2,716 employees, and Homeplus by 1,145 employees, the smallest reduction. During this period, Emart expanded its warehouse-style supermarkets, increasing the number of stores from 150 to 157, while Lotte Mart slightly decreased from 113 to 110 stores. In contrast, Homeplus sharply reduced its stores from 140 to 127. Despite having the largest reduction in store numbers, Homeplus had the smallest reduction in staff.

Typically, private equity firms improve profitability through large-scale restructuring after acquiring companies and then sell them at a profit exceeding their investment. However, after being acquired by MBK, Homeplus reduced the number of stores but did not aggressively cut staff. This was largely due to strong opposition from the Homeplus labor union whenever assets such as stores were liquidated.

As a result, Homeplus experienced declining sales every year, while selling and administrative expenses, including labor costs, continued to rise, leading to losses starting in 2021. This indicates that even before accounting for the approximately 400 billion KRW annual interest expenses from MBK’s leveraged buyout (LBO), Homeplus was unable to generate cash through operations.

This labor issue is cited as a key reason behind Homeplus’s sudden initiation of corporate rehabilitation procedures last month. In fact, the Homeplus labor and management began wage negotiations in October last year and reached a tentative agreement on the 24th of last month, just before the rehabilitation filing. The tentative agreement included a clause to form a labor-management consultative body to discuss store sales, meaning sales would be impossible without union approval.

However, with the start of the corporate rehabilitation process, Homeplus must repay various debts through the sale of real estate assets, and large-scale workforce reductions and restructuring for management efficiency have become indispensable.

Homeplus plans to submit its rehabilitation plan by June 3. Meanwhile, the Homeplus labor union began a tent protest on the 14th, demanding accountability from MBK Chairman Kim Byung-joo and calling for a rehabilitation plan without restructuring.

In the opening scene of the film "Cart," the protagonist Sun-hee (played by Um Jung-ah) chants "The customer is king," followed by "If the company does well, I do well too." This line emphasizes the unfairness of Sun-hee, an ordinary supermarket employee, being suddenly laid off just before her conversion to a regular position. However, in reality, extreme labor-management conflicts are ultimately threatening jobs. As new technologies rapidly change consumer trends more than ever, it is time for labor and management to discuss ways to coexist and thrive together.