Lotte Vietnam misses plans to open more Lotte Mart supermarkets

By Tran Anh - Sep 12, 2018 | 08:43 AM GMT+7

TheLEADERNo supermarket was opened in the past eight months though Lotte Vietnam Shopping Joint Stock Company has set out an ambitious plan to open more 12 Lotte Mart supermarkets in Vietnam since early this year.

According to report by Lotte Vietnam Shopping JSC (Lotte Vietnam), a member of Lotte Group, the company has lost totalling 16.2 billion won (over $11 million).

Earlier, Lotte Vietnam, which owns and operates the Lotte Mart supermarket chain in Vietnam, suffered losses of 13 billion won ($8.95 million) in 2016 and 26 billion won ($17.9 million) in 2015. Lotte Vietnam's total losses from 2010 to 2017 were estimated to reach over VND1.6 trillion ($68.8 million).

It was recorded that there were 12 supermarkets continuously opened by the end of 2015 nationwide. However, due to continuous losses, in the two following years, no supermarkets were opened.

As a result, the Korean supermarket chain showed the slowdown in revenue in 2017. According to the report, Lotte Vietnam obtained revenue of more than 262 billion won (over $180 million) in 2017, slightly lower than that of 2016.

After two-year quiet period, in early 2018, the company announced plans to open more supermarkets in Vietnam, raising to 25 supermarkets in 2018, 29 supermarkets in 2019 and 32 supermarkets in 2020.

However, by the end of the second quarter of 2018, there were still only 13 ones. The thing that no supermarkets were opened also caused revenue growth of Lotte Mart chain to decelerate in the first half of 2018. Specifically, the chain generated revenue of 138 billion won ($95 million), up about 3.3 percent in won over the same period last year.

This reflects that Lotte Mart has become less competitive than its rivals in the retail market. Particularly, traditional supermarkets such as Lotte Mart or BigC are being vigorously contested by a system of convenience stores such as Vinmart and medium supermarket chains such as Bach Hoa Xanh.

Lotte Vietnam misses plans to open more Lotte Mart supermarkets after suffering losses
Inside a Lotte Mart supermarket in VIetnam

Explaining losses after a 10-year presence in Vietnam, Lotte Group said that the group has spent nearly VND9 trillion ($387 million) investing in infrastructure, strategic location and advanced equipment for 13 trading centres and hypermarkets under the Lotte Mart supermarket chain since 2008.

These are the initial huge costs that Lotte Mart as well as other foreign retailers have to invest in Vietnam.

Meanwhile, it usually takes from five to eight years for a Lotte Mart from its opening date to reach the break-even point.

The retailer also revealed many of trading centres under Lotte Mart in Dong Nai and Binh Duong provinces, Tan Binh district in Ho Chi Minh City, Dong Da district in Hanoi are not as profitable as initially planned.

However, Lotte Group committed to a long-term investment in Vietnam, accepting short-term losses. It is expected that by 2020, Lotte Mart will start to gain profits in the Vietnamese market.

Not only investing in supermarkets, this Korean group also takes part in other fields including e-commerce, fastfood and cinema.

In real estate, Lotte owns many hotels in Hanoi and Ho Chi Minh City and operates Lotte Shopping Plaza, a trading centre in Hanoi.