Shinsegae, CJ to tie up for product delivery, food launch

Retail-focused Shinsegae Group is set to outsource delivery services and logistics management for its e-commerce platforms such as SSG.COM and Gmarket Inc. to CJ Logistics Corp., South Korea’s No. 1 logistics company, through a new business cooperation deal with food-to-entertainment conglomerate CJ.

On Wednesday, executives from Shinsegae’s supermarket chain E-Mart Inc. and Shinsegae Property Co., a shopping mall operator, signed a memorandum of understanding (MOU) with their counterparts from CJ Logistics and CJ CGV Co., a multiplex cinema chain, on the business tie-ups.

Their cooperation will be focused on logistics, food and media.

The preliminary agreement is expected to help SSG.COM, Gmarket and E-Mart cut delivery costs and focus on sales marketing in their fierce competition with low-price online malls amid the fast grocery delivery service boom.

CJ Logistics will likely achieve economies of scale from the business partnership that would significantly increase its delivery volume.

From as early as July, the logistics firm will take charge of Gmarket's next-day delivery service, which guarantees delivery within a day of an order being placed.

SSG.COM is in talks to sell its two logistics centers in Gyeonggi Province, including one in Gimpo bordering Seoul, to CJ Logistics.

Shinsegae is considering securitizing some property assets, including E-Mart’s stores, and selling stakes in subsidiaries including Shinsegae Food Inc. to reduce losses from SSG.COM and Gmarket, according to investment banking sources.

SSG.COM is mired in accumulated losses amounting to 370 billion won ($270 million) as of the end of 2023. GMarket has posted cumulative losses of 95.4 billion won over the past two years.

In 2023, E-Mart posted its first-ever annual loss of 46.9 billion won.

FOOD DEVELOPMENT

Under the MOU, E-Mart will develop food products jointly with food company CJ Cheiljedang Corp.

In August last year, E-Mart, SSG.COM and Gmarket pre-launched 13 new Cheiljedang food products two months before they hit the market.

“Shinsegae’s distribution and sales networks, both online and offline, are the optimal test beds for our new products,” said a CJ official.

“The two companies will go further than pre-launching new products, collaborating from the product planning stage to release cost-effective products,” he added.

MEDIA

Shinsegae and CJ groups will also explore collaboration in the media market, for which they did not give details. CJ is South Korea’s No. 1 producer and distributor of movies, drama series and TV shows.

The two business groups will allow their customers to also earn membership reward points when making purchases at the other's stores.

Their cooperation agreement comes as Shinsegae Group is endeavoring to find a new financial investor to buy shares in SSG.COM from two private equity firms Affinity Equity Partners and BRV Capital.

Shinsegae is South Korea’s 11th-largest conglomerate with 53 subsidiaries, which together generated sales of 366 trillion won in 2023. CJ Group, which ranked 13th, manages 73 units with combined sales of 311 trillion won.

Write to Hun-Hyoung Ha at hhh@hankyung.com

Yeonhee Kim edited this article.