[Exclusive] Shinsegae Department Store to Introduce In-App Payments and Reenter E-Commerce Amid Business Separation

'Beyond Shinsegae' Service to Launch in the App Next Month
New Product Search and Payment Features Added to Shinsegae's Own Mall
Previously, Products Were Only Available Through SSG.com
"Aims to Enhance Customer Shopping Experience and Expand Channel Choices"
Move Seen as a Preemptive Step Ahead of Potential Business Separation

Shinsegae Department Store is set to fully launch its e-commerce business, enabling customers to search for and purchase department store products directly through its own application (app). By incorporating product display and payment features?previously unified under SSG.com, the Shinsegae Group's e-commerce platform?into its own mall, the company aims to enhance the shopping experience and improve purchasing convenience for customers. There is also speculation that Shinsegae may partner with other online platforms in the future.

Shinsegae Department Store Main Branch. Provided by Shinsegae Department Store

According to Asia Economy's coverage on July 10, Shinsegae Department Store has confirmed plans to introduce the 'Beyond Shinsegae' service, which will include these shopping features in its app as early as next month.

Currently, the Shinsegae Department Store app serves as a guide for consumers, offering event categories such as promotional events, pop-up stores, and exhibition information, as well as sections introducing membership programs and store status. To purchase products sold exclusively online by the department store, customers must access the Shinsegae Department Store section within the SSG.com app to select and pay for items. While the 'Shinbaek Gift Shop' section of the Shinsegae Department Store app provides price information for categories such as fashion, accessories, beauty, and health foods, and offers gift wrapping services, the payment process is still linked to SSG.com when a purchase is made.

With the introduction of the Beyond Shinsegae service, customers will be able to search for products and make payments directly within the Shinsegae Department Store app. A Shinsegae Department Store representative explained, "This is an effort to expand the existing method of online shopping, which was previously only possible through SSG.com, in order to diversify shopping opportunities and channel choices for department store customers."

Screenshot of Shinsegae Department Store application.

There is analysis that the decision by Shinsegae Department Store to directly enter the online commerce market was influenced by the lifting of SSG.com's non-compete (business competition prohibition) clause. Previously, SSG.com reportedly promised a non-compete agreement when it attracted investments totaling 1 trillion KRW from Hong Kong-based private equity firms Affinity Equity Partners and BRV Capital Management in 2019 (700 billion KRW) and 2022 (300 billion KRW).

This clause is said to have stipulated that major shareholders of SSG.com, such as Emart and Shinsegae, could only conduct e-commerce business through SSG.com. However, after switching financial investors (FI) to the new investor 'Olympus Jeilcha' in November last year, this non-compete clause was removed. Olympus Jeilcha is a special purpose company (SPC) participated in by six banks, including KDB Industrial Bank, Shinhan Bank, and NH Investment & Securities, and four securities firms.

However, SSG.com maintains that the integration of Shinsegae Group affiliates' online malls into SSG.com was solely to consolidate online business capabilities, and there is no confirmation regarding the existence or removal of a non-compete clause.

Some analysts suggest that this may be a preemptive move in anticipation of Shinsegae Group's possible business separation. In 2014, Shinsegae Group integrated the online business divisions of Shinsegae Mall and Emart Mall into SSG.com. Subsequently, the online shopping mall business divisions of Emart and Shinsegae Department Store were spun off and merged to launch the consolidated entity SSG.com. As of the end of last year, Emart held 45.6% of SSG.com shares, Shinsegae held 24.4%, and Olympus Jeilcha held 30%.

To complete the puzzle for business separation, Emart and Shinsegae need to reorganize their jointly held shares in SSG.com. Under the current Fair Trade Act, for affiliated companies to be separated, cross-shareholdings must be less than 3% for listed companies and less than 10% for unlisted companies. Industry insiders believe that if SSG.com's shares are reorganized, it is more likely that Shinsegae will transfer its shares to Emart, given the potential synergy with Emart's core grocery business. In this scenario, Shinsegae Department Store would need to fill the gap by operating its own online commerce platform with product search and payment functions.

To strengthen the competitiveness of its department store division's online business, Shinsegae established an 'Online Promotion Task Force' in May and appointed Executive Vice President Kim Sunjin, who is also the head of Shinsegae's business division and the manager of the Gangnam branch, as the head of the task force. The Online Promotion Task Force is tasked with seeking ways to create synergy among the various online platforms operated by the department store division, such as Shinsegae Mall and ShinsegaeV (formerly SI Village).

A Shinsegae Department Store representative cautioned against overinterpretation, stating, "Even if we introduce purchasing services through our own app, structures such as sales settlement and commission payments will continue to be linked to SSG.com, so there will be no significant changes."

Meanwhile, with the launch of the Beyond Shinsegae service, there is also discussion about Shinsegae Department Store potentially entering or partnering with other online platforms in the future. Until now, SSG.com has contracted with major e-commerce platforms such as NAVER, Kakao's shopping service, Gmarket, 11st, and Auction, and Shinsegae has supplied department store products through these channels. If Shinsegae Department Store takes a more active role, it could expand to include high-demand services such as inter-platform partnership discounts and gifting. However, related platforms responded, "There is nothing to confirm regarding this matter."