Lotte Shopping: Resurrected in Indonesia after death in China

JAKARTA – On a hot spring day in March, Lotte Mart’s Gandaria City Mall hypermarket was as bustling with shopping Indonesians as usual.

It is not uncommon for young Indonesian boys and girls in their teens and 20s to hum along to “So Hot,” a 2008 hit song by Korean girl group sensation Wonder Girls played at the South Korean retail giant’s flagship marketplace in the capital.

A crowd of young shoppers was snapping up items at a food corner that sells well-known packaged Korean products such as Buldak-bokkeum-myeon (hot chicken flavor ramen), Shin Ramyun (spicy instant noodles) and Milkiss (a soft drink).

Another group of people was flocking to the K-food section that sells Gimbap (seaweed rice rolls), Tteokbokki (simmered rice cake) and seasoned chicken in the 6,777 square-meter shopping mall.

If it weren’t for the hijab-wearing women, the store would have been no different from any other Lotte Mart store in Korea.

BUILT AROUND K-FOOD, K-CULTURE

Lotte Shopping Co., parent of hypermarket operator Lotte Mart, has been rapidly expanding its business in recent years in Southeast Asia, notably in Indonesia and Vietnam, tapping into the growing popularity of Korean food, Korean culture and all things Korean among the 20- and 30-somethings, especially those who like spicy food.

Last October, Lotte Mart launched the Food Innovation Lab, its R&D center, in Indonesia, to develop food tailored to Indonesian taste.

After strengthening the K-food section of its deli corner, Lotte’s overall sales at the Gandaria City Mall increased by 50%.

Lotte has also strengthened its line of private brand (PB) products to foray into the Southeast Asian market.

Lotte Mart’s Vietnam corporation has been developing its PB products since 2016, with the number of its PB product types now rising to over 1,000.

The Korean retailer’s PB products accounted for 15% of its total sales in Vietnam at the end of 2022, up from a mere 1% in the early years of its advance into the country in the 2010s.

CHINA PULLOUT

Lotte Group, Korea’s fifth-largest conglomerate, previously focused on China, the world’s largest consumer market, before it was forced to pull out in 2018 in the wake of Beijing’s retaliation against Korea’s decision to deploy THAAD, the US Terminal High Altitude Area Defense system, in Korea – a potential military threat to the mainland.

When Lotte’s business operations were in full swing, up until 2015, the number of its stores across the country reached more than 100.

Following its pullout from China, Lotte turned its sights toward Indonesia – Southeast Asia’s largest economy and the world’s fourth-most-populous country – alongside Vietnam.

As of 2022, Lotte’s Indonesian sales topped 1.08 trillion won ($831 million), accounting for 73.4% of its entire Southeast Asian revenue.

Indonesia has a large population of young people with no dominant local retail competitors, meaning high growth potential, Lotte said.

In the country’s wholesale hypermarket segment, which deals with retailers, Lotte is already the market leader with a 46% share.

The Korean company said it is making the most of Indonesia's geographical conditions with its many volcanic islands and the local infrastructure that has developed a system where middlemen purchase goods from wholesale stores and deliver them to retail stores.

Lotte said it is also in the middle of integrating its wholesale and retail food organizations in Indonesia as well as combining fresh food and processed food businesses to achieve economies of scale.

Lotte wants to turn its Indonesian operation into a place where people can experience K-culture, a Lotte Mart Gandaria City Mall official said, between singing along to Wonder Girls’ So Hot.

“I’m so hot. I’m so pretty. I’m so cool.”

Write to Mi-Kyoung Lee at capital@hankyung.com

In-Soo Nam edited this article.