Jul 3, 2008

Business - Lotte Ambition

A South Korean retailer plans a bold move into China
WOMEN in South Korea have a reputation for being some of the world’s most demanding shoppers. Keen bargain hunters, they have an eye for quality and if something falls short of their expectations they are not shy of venting their anger. They photograph shops or goods that fail to make the grade, and post pictures online with detailed and withering criticism; the offender may then be shunned by other buyers. So exacting are the demands of Korean customers that Western firms often solicit their opinions of new products before launching them. If you can please a Korean customer, the feeling goes, you can please anyone.
Accordingly, South Korean department stores provide some of the best service in the world. With a smile and a bow, sales assistants scurry after customers, attending to their whims while calming their tearful children. Lotte, South Korea’s biggest department-store chain, thinks its experience at home makes it ideally suited to serving the new rich in other fast-developing economies. In July it plans to open a huge department store in China, in the Wangfujing shopping district in Beijing. It has set an annual sales target for the store of $150m. The wealthiest customers will be granted special parking spots and will be guided around the store by personal attendants. (Appealing to the very rich works well for Lotte at home: its richest 1% of customers accounted for 17% of its $5.8 billion in sales last year.)

Lotte’s Beijing store will be a test of the company’s plans to launch nine more stores in other big Chinese cities. It has asked consultants to analyse the Chinese market and help it choose a combination of foreign and local brands to appeal to Chinese shoppers. Lotte plans to sell South Korean cosmetics and clothes, banking on the appeal of Korean pop culture, which is popular throughout Asia. Lotte’s Beijing staff have been sent to Seoul to learn about its procedures, marketing and service.
But Lotte’s experience in Russia, where it opened its first foreign store last September, suggests that expanding abroad may prove harder than it thinks. It has had to spend a lot on advertising, has found it difficult to attract experienced staff for its Moscow store, and has cut its annual sales target from $140m to $120m. It hopes China will not prove such a tough nut to crack, since the cultural differences with South Korea will be less pronounced. “Many retailers find China tough,” says Yi Il-min, Lotte’s director of international business development. “We’re quite comfortable.”

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