Lotte On, the e-commerce arm of Lotte Shopping, has announced a voluntary retirement program for its employees. (Image courtesy of Lotte On)
SEOUL, Jun. 7 (Korea Bizwire) – Facing mounting losses due to the emergence of formidable “C-commerce” rivals like Alibaba’s AliExpress and Temu, South Korea’s major e-commerce players have embarked on aggressive cost-cutting measures.
Industry experts predict that these efforts to bolster profitability, rather than pursue growth at any cost, will continue throughout the year as external factors like sluggish consumer spending amplify uncertainties in the retail landscape.
According to industry sources, Lotte On, the e-commerce arm of Lotte Shopping, has announced a voluntary retirement program for its employees – the first such initiative since its launch in 2020.
The program is targeting employees with at least three years of service, offering either a lump sum payment equivalent to six months’ salary or six months of paid leave before retirement.
“By streamlining our workforce, we aim to reduce costs and enhance the competitiveness of our organization,” a Lotte On official explained, citing the rapidly evolving e-commerce market.
Since its inception as Lotte Group’s integrated online mall, Lotte On has grappled with annual operating losses hovering around 100 billion won. Its cumulative operating losses are now approaching 500 billion won.
Industry observers anticipate that as a latecomer to the e-commerce arena, Lotte On will sustain its intensive overhaul efforts throughout the year to secure its long-term survival.
Last month, the company discontinued its “Baro Delivery” service, which offered two-hour delivery for grocery items from Lotte Mart, as part of its broader efforts to streamline logistics operations.
11Street, considered one of South Korea’s first-generation e-commerce platforms, will relocate its headquarters from Seoul Square near Seoul Station to the U Planet Tower in Gwangmyeong, Gyeonggi Province, in September.
This relocation is part of the company’s ongoing efforts to streamline its operations. The U Planet Tower, located near Gwangmyeong Station, offers monthly rental rates approximately one-third of those at Seoul Square for comparable floor space. The move is expected to save tens of billions of won in annual rental costs.
A business alliance between the Shinsegae Group and the CJ Group (Image courtesy of Shinsegae Group)
Ranked third in transaction volume behind Coupang and Gmarket, 11Street has accumulated losses while its planned initial public offering (IPO) has been delayed. As a result, the company is currently undergoing a sale process, with an estimated valuation of around 500 billion won.
Improving profitability indicators has become crucial for 11Street to facilitate a smooth sale.
SSG.com, the e-commerce platform of the Shinsegae Group, and Gmarket have staked their bets on optimizing logistics operations.
Through a business alliance between the Shinsegae Group and the CJ Group, SSG.com has entrusted its rapid delivery services and the operation of two advanced logistics centers outside of Seoul to CJ Logistics.
Gmarket has outsourced its “Smile Delivery” service, capable of handling 100,000 packages per day for next-day combined deliveries, to CJ Logistics.
Both companies anticipate significant cost savings through economies of scale generated by consolidating logistics operations.
Last year, SSG.com recorded an operating loss of 103 billion won, while Gmarket reported a 32.1 billion won loss. In the first quarter of this year, their respective operating losses stood at 13.9 billion won and 8.5 billion won.
“With the e-commerce market’s profitability hierarchy becoming more pronounced, topped by Coupang, and the entry of Alibaba and Temu intensifying the survival competition, domestic players can no longer ignore their accumulated losses from prioritizing top-line growth,” an industry insider commented. “Diverse forms of cost-cutting initiatives are likely to continue throughout the year.”
Ashley Song (ashley@koreabizwire.com)
