How Shinsegae Came From a Corporate and Traditional Company To Becoming One of The Top Giants Of E-commerce in South Korea

How Shinsegae Came From a Corporate and Traditional Company To Becoming One of The Top Giants Of E-commerce in South Korea

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The Duty Free and Department Store began its business in Busan, South Korea in 1930, achieving to be the biggest department store in the world, in 2009. Originally, it was part of the Samsung Group since 1945, but separated in 1990.

In order to make a digitally sustainable business, they had to keep up with the changes which are happening so quickly nowadays. The Digital Transformation needed for their business growth.

The decision came after the Vice Chairman of Shinsegae Group Chung Yong-Jin told his executives that the retailer should go fully online to maintain growth, according to sources close to him.

“[Through the new entity], we hope to maintain the existing SSG.com brand and maximize brand power by raising [people’s] awareness of our professionalism in the online market,” the company said in a statement.

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In 2018, Shinsegae Group signed a memorandum with BRV Capital Management, an investment firm, and with private equity firm Affinity Equity Partners to gather over 1 Trillion KRW (US$938 Million) for their new e-commerce unit.

The retailer’s decision to expand its e-commerce business was motivated by the steep rise of purchases over the internet in South Korea, since most consumers purchase online, usually with their smartphones on the go, or at work.

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With the e-commerce industry boom in South Korea, consumers in the whole country have shifted their purchasing behavior, accompanied by the steep rise of online retailers and their fast delivery processing, such as Kurly Market and Coupang, one of the biggest online retailers in South Korea.

Source:[https://bit.ly/2HzFcvY](https://bit.ly/2HzFcvY)

Purchases made over the internet reached 7.55 trillion won in November 2017, and recently 10.5682 trillion won in June 2019, rising 17.3% from June 2018. The mobile shopping transaction rate recorded 6.8469 trillion won in June 2019, rising 25.6% from June 2018.

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To understand better

Back in 2017, aside from its physical stores, Shinsegae online platforms were divided into two major stores: Shinsegae Online Department Store and Emart.

With the coalition between the two divisions, SSG planned to make an all-in-one platform to combine all of its chains, and create the Amazon of South Korea.

“The company believes that such big investment was available because Shinsegae Group’s online business has shown rapid growth in recent years,” the company said in a statement.

Shinsegae Group started reaching new horizons when they first launched its online business SSG.com, which augmented the online shopping experience by providing a simple purchasing process for its customers, with faster delivery service and range of products by launching a new logistics center in South Korea, named NE.O, in 2014.

Its revenue in 2015 was 1.08 trillion won. In 2016, the platform raised 1.69 trillion won, a 32 percent year-on-year growth. In 2017, it generated 1.51 trillion won as of the third quarter.

“Online malls for Shinsegae Department Store and Emart were the main content for SSG.com,” said a Shinsegae spokesman. “But since each mall belonged to the department store and the discount chain, there was clearly a limit in creating synergy,” the spokesman added.

Take away

There is no doubt that nowadays businesses should see the industry changes and act quickly to transform their business to evolve with the trend line which draws consumers every year. You can either keep up with it and be part of the change, or you can underestimate it and ignore it all and let it pass by.

This is what Shinsegae did, contrary to many companies in Asia which appear like they had stopped in time, and are moved only by revenue. Not only their services and products become bureaucratic, but their vision become stagnant along with their efficiency.

The new SSG.COM concreted the vision of Choi Woo-Jung, who has expressed his willingness to take the challenge of making the new vision of the conglomerate to become true.

Even though revenue keeps rising, it won’t be glorious. Retail giants will find it very challenging to make a turnaround this year, due to the fierce pricing and the internal delivery infrastructure competition.

Source: Shinsegae, Moodle Davitt Business Intelligence Unit

Their operating profit declined -14,7% as the cost of building up their infrastructure. Despite the growing costs, Shinsegae’s sales to resellers continue to power growth with Myeng-dong branch experiencing increase in 34% of sales to resellers, and operating profit growth.

With slow growth, but striking the right point with consumers, where the pricing point lies… With an strategy that will certainly pay off in the mid-long term range.