LG Elec to strengthen its direct-to-consumer sales strategy

South Korea's LG Electronics Inc. is strengthening its direct-to-consumer (D2C) strategy and expanding its lineup of low- to mid-priced products to secure loyal customers and diversify its consumer base for a steady revenue base. The company's top management believes that increasing market share during a recession will maximize profits during a boom time, according to analysts.

According to industry sources on Monday, LG Electronics is in the final stages of adjusting its D2C business strategy, including establishing a dedicated D2C organization and enlisting specialized personnel. This follows the announcement made by LG Electronics CEO Cho Joo-wan at the regular shareholders meeting on March 27 that his company will concentrate on nurturing online D2C business.

D2C is a strategy in which companies sell their products through their own online malls or offline stores without going through middle distribution channels such as E-Mart and Amazon. The strategy has the advantage of securing loyal customers and enabling customized marketing by communicating directly with consumers. It also helps in formulating sales strategies by acquiring a large amount of customer data. Companies like Nike, Apple and Starbucks have expanded their loyal customer base based on D2C strategies.

LG Electronics has experimented with the D2C strategy until recently, with the sale of its all-in-one washing and drying machine "Tromm Wash Tower Compact" only available on its official website in August last year being a representative example.

Until now, LG Electronics has sold most of its home appliances through home appliance stores and online shopping malls. In January of this year, it also opened its own online mall dedicated to its beauty device brand Pra.L, which is only sold through the exclusive mall.

LG Electronics plans to expand its product lineup as well, focusing on low- to mid-priced household appliances and TVs in the Korean and overseas markets. This is seen as one of the strategies to diversify its consumer base and maximize sales. LG Electronics has been evaluated to have an advantage over its competitors in the premium home appliances and TV product lines, but its low- to mid-priced product range has been limited.

"We will strengthen innovative products in the low- to mid-priced market to respond to the polarization of consumer demand," explained an LG Electronics senior official.

Write to Ik-Hwan Kim at lovepen@hankyung.com